SAN DIMAS, CA—An unnamed exchange buyer has purchased a 33,428-square-foot industrial facility from Argent LLC. The purchase price for the property was not disclosed, but sources unrelated to the deal say that the property traded hands for $153 per square foot at a 5% cap rate, showing that investors, and particularly exchange buyers, are scooping up industrial assets in every size range due to the supply constrain in the market. 

“The investment market is absolutely on fire. It is so strong because of lack of product that many buyers are forced to buy empty buildings,” Rick Sheckter, executive managing director at Newmark Grubb Knight Frank, tells GlobeSt.com. “In the San Gabriel Valley, the average building size is 30,000 square feet to 40,000 square feet, but there is demand for 5,000-square-foot buildings for exchange buyers.” Sheckter represented the seller in the transaction along with his NGKF partner Randy Lockhart. Michael Adams of Excelsior Partners represented the unnamed buyer.

Located at 328 West Arrow Highway in San Dimas, the property was recently developed in September 2014, and is fully leased to a Chinese-based food manufacturer, who has a five-year lease term at the property. The quality of the property and the 100% occupancy rating made it extremely attractive to investors looking for product. The seller, however, had not yet brought this property to market. “We had pre-leased the building for five years, and, because the client was in the midst of building other industrial buildings, he decided that it might behoove him to reduce some of the debt load,” says Sheckter. “However, we didn't go to the market; the market came to us. We got an unsolicited offer from an exchange buyer in the market. They agreed to the price my client wanted, and we put the deal together.”

According to Sheckter, this type of off-market transaction is becoming more and more popular in the market because of the incredibly low vacancy rate. “When you have a 1% vacancy, there are a lot of deals going down off market,” says Sheckter. “This was an exchange buyer with a lack of product, and they seemed tickled pink to get a 5% cap rate on this property.” Sheckter adds that the average building size is 30,000 to 40,000 square feet, so while the individual building sizes are small, the market is large with more than 190 million square feet.

The San Dimas market is tight all around. The office vacancy rate in the area has dropped to 2.4%, leading to some pretty remarkable sales, including the recent redevelopment property purchased by Stillwater Investment Group, Greenlaw Partners and an affiliate of Walton Street Capital for $18 million.