May 15, 2019 – When two Colliers International brokers descended on the owners of the last vacant piece of land in this centrally located and almost exclusively industrial municipality just east of downtown Los Angeles and told them they had a strong buyer for the 10-acre dirt lot they had owned since the 1950’s, they were skeptical. Afterall, they had been marketing the property for about seven years and every time they had accepted an offer and it had entered into escrow, the deal had fallen through due to site-specific environmental challenges.
But this time, with Colliers representing Xebec Realty, a Dallas-based industrial real estate development and management platform with roots in Southern California and a long history of successfully working alongside local, state and federal environmental agencies to successfully remediate environmentally challenged sites to make them developable again, an “as is,” below-market-value, deal was struck for the 10-acre parcel. Groundbreaking is now imminent on a 234,330-square-foot and state-of-the-art “last-mile” logistics hub slated for completion in about a year.
The project will be marketed exclusively by the same two Colliers brokers, Executive Vice Presidents Christopher Sheehan and Scott Heaton, who originally approached family owners and then negotiated the competitive $13 million price tag Xebec paid for it. Both Sheehan and Heaton are experienced industrial brokers who have posted decades of success working in the most densely populated and in-demand urban-infill industrial markets of Los Angeles County, including the Mid-Cities market where this project is located.
“Not only is this now a developable parcel of land, but its value has risen proportionate to its planned use and due to record demand fueled by retailers who are seeking closer-in, ‘last-mile’ locations in order to make and keep ever-faster, more-competitive delivery promises to their growing online customer base,” said Sheehan. “It is becoming nearly impossible to find enough land on which to build ground-up, state-of-the-art logistics centers that will allow for next-day, or, in some cases, same-day, delivery of retail products ordered online.”
Located at 8201 Sorensen Avenue in Santa Fe Springs, the competitive price paid for the land by Xebec was profitable enough for the family owners since the acreage they had held for some 60-plus years was turning out to be virtually value-less in today’s market due to its environmental issues. It wasn’t until Xebec, experienced with successfully managing environmental risk, agreed to purchase the site that members of the selling family began to finally believe their hopes of reaping any profit would be realized.
“Xebec figured it out and was able to close escrow, work through all the regulatory agencies and the city, and expects to significantly exceed its underwriting guidelines not only through its experience in dealing with environmentally challenged sites, but also by riding the wave of increased demand that has resulted in upward pressure on industrial urban-infill rents,” said Heaton.
Other factors that helped position Xebec first among a number of other bidders included the development firm’s growing list of successful projects in Los Angeles County, especially in this particularly sought-after industrial market that lies at the heart of the nation’s most-populous Metropolitan Statistical Area (MSA), as well its success in transforming troubled properties previously thought to be undevelopable, according to Sheehan.
In addition to direct access to a full range of air, surface and ocean transit routes, the new logistics hub will include 31 dock-high loading platforms, two grade-level loading positions, 36-foot minimum clear heights, 9,015 square feet of office or administrative space, 264 parking stalls, and a flexible power center with 2,000 AMPS (277/460 volts).
“This transaction and subsequent planned development, by far, are among the best examples yet of how the Internet is fueling demand for industrial real estate in what I call the retail-industrial complex,” Sheehan added. “It’s almost surreal how the appetite for industrial space designed to house the growing list of logistics firms that deliver products ordered online has grown in the past three or four years. Yet, in terms of future growth, the numbers of consumers using the Internet right now for that purpose is infinitesimal compared to what it will eventually be as more and more consumers become familiar and comfortable purchasing products online. Where we will find the land to meet future demand is anybody’s guess.”