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Thursday, Mar 28, 2024

Industrial Real Estate Market Remains Active

There is roughly 172 million square feet of industrial real estate space in the greater San Fernando Valley area, but with a lot of activity and low vacancy rates, companies can spend up to a year to find the right space, according to industrial real estate experts. “There is a lot of activity, and with a 2 percent vacancy rate, there are few opportunities for existing (properties),” according to Craig Peters, an agent at CBRE Group Inc. in Universal City. Peters has specialized in industrial properties for more than 25 years. He cautions that the vacancy rate doesn’t tell give a comprehensive picture of the market. There are a number of properties that are obsolete. The interior clear height, type of loading for trucks and column spacing make many of the available properties undesirable, as they fail to meet current customer demands. He points to his client, Aerospace Dynamics International Inc., a commercial airline parts manufacturer that purchased land last year and started construction earlier this year on a roughly 140,000-square-foot building in Valencia. Aerospace Dynamics needed more space and couldn’t find the type of space it was looking for in the existing industrial stock, so it is building the facility to suit, Peters said. The new facility will be the company’s fifth in the area. Companies, especially those in the aerospace and defense, biomedical and entertainment industries, must consider a variety of factors when deciding on the best space, said Bennett Robinson, who has worked at CBRE covering industrial real estate for nearly 25 years. “The lifecycle of a business is a concern in whether to buy or lease an industrial property,” Robinson said. “If they are a new company, they aren’t going to want to commit to purchasing. But if they are established, they are more likely to want to buy.” Patrick DuRoss, who works in the Encino office of Colliers International, notes that it’s costly for manufacturers to move, especially with heavy equipment involved. “We are seeing an increase in manufacturing moves in the last year,” DuRoss said. “It’s encouraging.” Peters said he also has noticed a significant increase in industrial market activity in the past year as vacancy rates fell and lease rates moved up. “I feel good about the market and its continuing recovery.” Why is the industrial market so active? Brokers say the movement is partially driven by low interest rates. “You see interest rates so low now you see a lot of companies looking for industrial properties,” Peters said. “But they are still considering things like, ‘What direction is the market headed? Will this building house my company for at least five years?’” Mental Health Center Consolidates in Van Nuys There’s a new lessee in the building that housed the former Social Security Administration offices in Van Nuys. San Fernando Community Mental Health Center is leasing the space at 6501 Van Nuys Blvd., according to NAI Capital Inc. Agents Cathy Scullin and J. Richard Leyner in the Encino office represented the landlord, C.P. Associates LTD. in the deal. The 10-year lease for the 25,183-square-foot space is valued at more than $5.5 million. “The tenant was looking to consolidate several community service programs into a central location and the availability of this building, as well as its ideal location, has offered them that opportunity,” Scullin said, in a written statement. The new center is a few months from opening, according to NAI Capital spokeswoman Sharon Fitzgerald. The site is the former home of the Social Security Administration building that occupied the space until May. Kazi Foods Sells Third KFC Location Marcus & Millichap recently announced the July 20 escrow closing of a sale/leaseback of a Burbank KFC property. It was the third such transaction agents Mike James and Kyle Matthews of the Encino office handled this year for Studio City-based Kazi Foods, the second-largest KFC franchisee in the country. The sale price was $1.3 million for the 1,504-square-foot leased property at 3518 West Victory Blvd. Kazi Foods signed a 20-year lease for the property. Included in the lease is 10 percent rental increases every five years, according to Marcus & Millichap. Kazi Foods, owned by Zubair Kazi, has been selling off properties around the country as it deals with its bankruptcy status. Calls to Kazi Foods about the transaction were not returned as of press time. Staff Reporter Leah Gillis can be reached at 818-316-3124 or [email protected].

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