There are currently two opposing trends in the commercial real estate market in the greater Los Angeles area that provide investment opportunities: vacancies in the office market continue to increase, but the demand for industrial, open-air storage is exceeding capacity.
First, the office market continues to show wear and tear from the pandemic and is still losing tenancy.
Some tenants are trying to reconstruct their leases, and others are trying to sublet their spaces. So, right now, we have a surplus of sub-lets on the market. If this trend continues, and this depends on how many companies will return to a full in-office workforce in the next few months, it could cause the office market to have more vacancies and office buildings to have less value. Therefore, it is not a bad time to be in the market for an office either as an owner/user or as an investor.
The investment aspect will depend on how long it will take for a new owner to fill vacancies and what type of concessions will have to be made to entice people to fill up the new office spaces. Nevertheless, there are some nice office buildings on the market, and those sellers will have to be more negotiable than a year ago.
In the industrial market, there is an interesting niche market that has come about: land used for open-air storage of large trucks, smaller vehicles, storage containers, and even porta-potties and other items. There is currently not enough covered or indoor storage space, and the thinking is, why build a structure to house some of these items when it might not be necessary?
If you look at Southern California airports, many planes are tied down here because we don't usually get weather that can damage them, and the same thinking goes for outside storage areas. As a result, industrial land pricing is still on the rise, but then again, you won't have to build a structure in order to achieve a revenue stream.
Of course, there are items that can't be outside and that require a structure. Eventually, owners of open-air storage land can build a structure that adds value.
Land suitable for open-air storage is a good investment opportunity, and there are ready tenants out there now.
The closer the land is to the harbors of Los Angeles and Long Beach, the better, but we are also seeing open-air storage land in the inland areas of San Bernardino County.