Rearview Mirror Helps Judge the Road Ahead

Brokers talk property sectors after year of uncertainty.

By Michael Aushenker
Monday, February 15, 2021
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Two brokers in the trenches of the North Los Angeles commercial real estate market spoke to the Business Journal about how 2020 went and what we can expect through 2022.

The consensus between Mike Tingus, president of Lee and Associates- LA North/Ventura and Warren Berzack, national director of Lee & Associates’ Multifamily Advisory Group was that industrial remained strong’ office and multifamily hung in there even as rents dropped significantly – and retail’s a mess.

Industrial thrives

“The first and second quarters were incredibly strong,” Calabasas-based Tingus said of the industrial sector. “The first quarter of 2020 reflected the last deal cycle – finishing 2019 deals.”
Then the bottom dropped by mid-March.

“We were all struggling trying to keep the ship afloat,” Tingus said of the period spanning through May.

Still, glimmers of large-scale industrial deals managed to surface, such as Overton Moore Properties’ deal with Amazon.com Inc. at its upcoming Avion Burbank and the large Bank of America building sale in Simi Valley. The 206,917-square-foot structure at 450 America St. – which is 100 percent leased to Bank of America – sold in January for $30 million.

“The North L.A. submarkets have seen tremendous growth over the past decade, most recently with Amazon taking 290,000 square feet adjacent to 450 America, placing this investment directly in the path of progress,” said Newmark’s Co-Head of U.S. Capital Markets Kevin Shannon, who, along with Newmark Executive Managing Directors Ken White, Rob Hannan and Sean Fulp, Senior Managing Director Laura Stumm and Managing Director Ryan Plummer, represented the seller, a subsidiary of Griffin Capital Essential Asset REIT Inc.

Tingus agrees with Shannon that industrial deals have not backslid since the outbreak.
“We’ve seen an incredibly tight market with vacancies under 5 percent, today under 3 percent,” Tingus continued.”

The office sector took a hit, albeit not one as fatal as first thought, even as more people worked from home.

Desirable space, Tingus said, constitutes a single- or double-story building with its own restrooms.
“There’s been a lot of demand from West L.A. to Conejo Valley,” said Tingus, who himself took advantage of lower interest rates and office migration and purchased a new headquarters in Thousand Oaks early last year. “We bought an office building in Westlake Village for $3.36 million.” Tingus said his team starts there March 1.

Retail, multifamily

The retail sector struggled to find a viable business model under multiple shutdowns of non-essential businesses such as restaurants and hair salons while retail landlords had no protections because of state and city moratoriums on tenant evictions, Tingus said.

“Retail (has) been brutal,” he explained.

Berzack said the sale of multifamily properties has surged during the pandemic, thanks to low interest rates and low inventory inflating apartment building prices.

And there’s potentially more upside in the future.

“There’s a decent amount of (investors) who are still sitting on the sidelines – buyers who don’t want to buy into this,” Berzack said.

Will 2021 improve?

Despite the harsh economics brought on by a pandemic, Berzack and Tingus remain cautiously optimistic.
“This year will be better than last year,” Berzack he said, “but I don’t think we will see the numbers of 2019.”

In the industrial and office quadrants, the prescription for a commercial real estate upswing post-pandemic, according to Tingus, will boil down to three words: Entertainment, entertainment, entertainment.

“The amount of content that’s backlogged right now is phenomenal,” Tingus said.

Berzack said of multifamily:“By second half of 2021, this year will be more active than last year because there’s light at the end of the tunnel,” referring to vaccinations introduced to the general public.

For tenants, rental rates in L.A. County started coming down last summer. After opening up more vacancy in the rental market, Berzack continued, “we should see some robustness in 2022.”