Conejo Valley Industrial Hits Top Pricing

Industrial pricing in the Conejo Valley is heading to record levels. Rexford Industrial recently purchased a 49,585-square-foot value-add property for $133 per square foot, one of the highest per-square-foot prices in the market. It’s no surprise values are heading up. The market, which sits north of Los Angeles and serves a strong manufacturing tenant base, has a sub 1% vacancy rate and growing demand. While the market is still a discount to the adjacent San Fernando Valley, there is momentum that could produce significant pricing increases this year.

“This was a 50,000 square foot building on a really large lot, so the coverage on it was only 28%,” Mike Tingus, president of Lee & Associates L.A. North/Ventura office, tells GlobeSt.com. “For the right buyer, it was a rare value-add opportunity, and there aren’t many in this market. There are not many buildings for sale, and there is such a pent-up demand that if you can find a building like this and reposition it with the amenities that industrial users want, like dock-high loading, it is a good opportunity.”

While the Conejo Valley market is certainly seeing healthy activity, Tingus says that this property was a rare opportunity, which helped to capture the above-average pricing. The building had been used as a call center by AT&T and Verizon for 20 years, and was marketed by another brokerage firm as an office property. As a result, it sat on the market. “We repositioned the property and took out the office improvements, and we marketed it for an industrial use,” says Tingus. “The office vacancy rate is 15% and the industrial vacancy rate is less than 1%, so it made sense.”

Because the land site was so much larger than the building, the brokerage team also partnered with the city to get approvals for an additional 25,000 to 30,000 square feet. That helped drive pricing significantly, opening the door for value-add investors. “I thought that we would get this pricing if we had an owner-user buy the property,” adds Tingus. “After we met with the city, they were very supportive of us adding more square footage to the site, because it was under utilized. Once we had that, there was a lot of potential for value-add investors. Rexford moved very quickly.” Rexford is going to develop the additional square footage and add dock-high loading, which is a rare feature in the Conejo Valley. The strategy has been successful. Not only did the property sell for record pricing, the brokerage team has already received leasing interest.

While $133 per square foot is significant for this market, Tingus says that Los Angeles is still significantly higher priced. Last year, he sold a 44,000-square-foot property in the San Fernando Valley for $230 per square foot. “This looks like a huge discount,” says Tingus, adding that pricing is heading up in the Conejo Valley. “There is upward momentum in pricing because the cost to build anything new is just astronomical. There is probably another $50 per square foot of potential value in the Conejo Valley.”