Ziman Says Suburban Will Have its Day Again

Richard S. Ziman, Rexford Industrial chairman

LOS ANGELES— Richard S. Ziman , Rexford Industrial ‘s chairman recently received Legends award at RealShare Los Angeles . When asked by Michael Desiato , VP of ALM ‘s Real Estate Media Group, about politics, he said that “you want predictability” noting that right now, we are in an arena where there is none. “The stock market doesn’t know what to do and it is a good indicator of what is going on,” he said. “Look at the money lost and the money made in the stock market. It is volatile.” Ziman continued that “You have political instability and the reason it is so important is that there are so many issues around it. There is a big treaty waiting to be signed… You have Europe at a crossroads.” Switching gears a bit, Ziman talked about the best investment you can make in real estate today, which he says is infill industrial in Southern California due to the tremendous barriers to entry. “The Inland Empire is a great market today,” he added. “There is a need for industrial space.” He explained that most people think industrial tenants are 100,000-300,000 square feet, but he said that Rexford’s average tenant size is 10,000 square feet. “We take buildings that are 100,000 square feet and create a better use for them by dividing it, making room for five 20,000-square-foot tenants.” Ziman noted that “Big tenants are like juggling with bowling balls. That was a rule… to have no bowling ball tenants.” When asked about the non-core major metro real estate, Ziman said that there is a disconnect. “There is more of a demand and more of a focus on core real estate. More of the capital wants to be there,” he said. But he said that sheer demand for value and for return will gravitate. “We will see a gravitation to the suburbs.” And once that gravitation happens, he said, there is demand for creative. “The conventional office space isn’t working. The tenant who wants to move wants to be attractive and needs all these things…you have to blow out the conventional office space.” He added that not only do you have to pay to demolish what you built 10 years ago that still looks fine but doesn’t work anymore but by the time you demolish and rebuild and retenant, is it worth it?” Ziman ends the discussion by pointing out that “Suburban will have its day again, but it is a bad investment now because you buy it at a higher cap.”