How Dedeaux Racked Up $500M in Industrial Deals Last Year

Dedeaux Properties had one of its strongest years in 2020. The firm completed $500 million in transaction volume, a total of 2 million square feet in logistics, distribution and cold storage assets in California. The transaction activity underscores the strength of the industrial market in California through the pandemic.

“Los Angeles and Inland Empire is one of the largest and strongest industrial markets in the US and has exhibited continued growth for some time,” Matt Evans, chief investment officer for Dedeaux, tells GlobeSt.com. “Contributing to this was an increased demand, accelerating the need for faster supply chains in order to deal with smaller, even single items. COVID-19 and stay-at-home orders further accelerated this trend and it was one of the biggest demand drivers for the impressive transaction activity in 2020.”

Of course, the pandemic also served to drive competition into the space. Through the course of the year, this resulted in increased asset pricing. “The market was uneven over course of year.  As we moved through the year though, the high level of competition that typically characterizes SoCal Industrial investment intensified which drove prices higher,” says Evans. In addition to new entrants, some of the existing players increased their emphasis on Southern California industrial versus other asset classes and/or markets.”

To navigate the new market competition, Dedeaux leveraged its long history of investing in the market. “Practically, we needed to rely on our team’s deep understanding of the market and opportunities—whether it was to build or buy—to effectively underwrite tenant needs and complex property level complexity positions in order to execute on these investments,” says Evans.

While the competition didn’t encourage a change in investment strategy, Dedeaux did adjust asset management of its existing portfolio in response to the pandemic. This included enhancing communication with tenants to better understand how challenges at the property level were impacting the broader market. “We were able to leverage our relationships and expertise to continue to perform and find opportunities. This included a programmatic joint venture with a national capital partner,” adds Evans.

In many ways, this helped to drive the company’s transaction volume for the year and provided insight on how to accurate underwrite properties, despite the market change. “Tactically, we were able to benefit from some of the uncertainty, which resulted in less competition as other investors were still trying to figure out how to underwrite their transaction,” says Evans. “As it related to our new developments and acquisitions, we implemented several safeguards to find a way to deal with an even slower entitlement and permitting process as both cities and counties implemented stay-at-home order and furloughs.”

This year, Dedeaux is equally bullish on the California industrial sector. “With deep capital, tenant and seller relationships, coupled with favorable macro trends supporting industrial asset demand, we believe we are well positioned to grow,” says Evans. “2020 was our highest volume year and based on current pipeline and where we sit today, we expect that 2021 to be even more active.”