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What kinds of projects and properties are the most active right now ?
I ’ m seeing a lot of owner-user activity in both sales and new construction … If ( a business owner ) can ’ t find anything ( to lease ), they think , “ Maybe I should build my own place and destiny .” When you do the math , with rents going up and SBA 504 ( loan ) rates locked in for 20 years at their lowest-ever ( level )… mortgage payments stay the same and your cost goes down … Most of the new development is focused solely on logistic centers , which will continue to drive rents higher across the board .
What do you think is driving these trends ?
Construction costs are a common theme . Logistic centers still pencil ( out ) due to their comparatively low tenant improvement costs as opposed to small , multi-tenant projects despite similar demand for the product types . If you get a big empty box with limited buildout inside , it ’ s far cheaper to build ( because there are ) fewer tenants — every tenant has bathrooms and sewer connection fees , which makes it very tough for small ( projects ) to financially work . If you can buy a small , light industrial ( building ), you ’ re going to be set — rents would have to double to compete . I leased a building in Concord for $ 1.87 per square foot and leased office space next door for $ 1.35 per square foot . Right now , you can get more for a warehouse than you can for an office .
ERIC REHN
VICE PRESIDENT , Kennedy Wilson Brokerage Group
MEMBER , CCIM Northern California
How has the pandemic affected the industry ?
Most industrial businesses are considered essential business and continue to operate to the best of their ability , albeit with restrictions . Additionally , the COVID-19 pandemic has accelerated a structural change in the economy and supply chains in the way consumers and businesses procure goods for consumption . As consumers spend less on entertainment and services … they tend to spend more on consumer goods . E-commerce trends went from 10 % of overall retail sales to 25 % of retail sales in the last 12 months , with some industries seeing e-commerce sales penetrations exceeding 65 %… Currently , the most active projects are large distribution , logistic and fulfilment centers of 300,000 square feet and larger being utilized by national tenants in the consumer consumption businesses .
What does the next year look like ?
As the impacts and restrictions of COVID-19 recede and economic and job growth resume , demand for products and services handled by the industrial and logistics sectors of the economy should increase , resulting in continued demand for additional space . During 2021 , the Buzz Oates organization plans to develop 14 industrial / logistics projects in the Sacramento regional area , totaling approximately 3 million square feet with an estimated value exceeding $ 300 million .
KEVIN F . RAMOS
CHIEF INVESTMENT OFFICER , Buzz Oates / Pac West Industrial Equities
BOARD MEMBER , NAIOP Sacramento Valley Chapter
MEMBER , NAIOP National Forums
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