Ocean West Capital Buys Flex Industrial Property in L.A.

Ocean West Capital Partners has acquired Smoky Hollow Flex Campus, a 152,000 square foot flex industrial building, in an off-market deal. Located on 5.1 acres in the Smoky Hollow area of El Segundo, the property is in one of the most highly sought-after industrial areas in Southern California.

The 1960s vintage building currently features brick façade, roll up loading doors, ceiling heights ranging from 15 feet to 36 feet and a parking ratio of 2.0/1,000 square foot, and it is on a contiguous block. Ocean West plans to execute a capital improvement plan to upgrade the property to better cater to aerospace and defense industries, which are established in the area, and the emerging technology, life science and entertainment industries. The improvement plan will include upgrades to the exterior, new landscaping, parking facilities, building systems, outdoor recreation spaces and the construction of a new building.

In recent years, the Smoky Hollow submarket has emerged as an innovation hub with tech startups, creative companies and light industrial users flocking to the area, which offers significantly lower rents than nearby markets on the Westside. Plus there is tremendous support from local leaders. In 2019, the City of El Segundo released a plan to develop nearly 3 million square feet of creative office, industrial and public facility buildings through 2040.

This has created a lot of opportunity for properties like Smoky Hollow Flex Campus. In addition to office demand from tech and entertainment companies and the existing aerospace industry, industrial users are voraciously looking for available space, which has become even scarcer in the last two years. By mid-2021, Marcus & Millichap found that the market would surpass pre-pandemic activity with industrial vacancy rate dropping 40 basis points to 2.9%.

Ecommerce growth from the pandemic along with record port cargo volumes and safety stock upgrades is driving the demand for industrial space. As a result, Los Angeles will continue its reign as the market with the lowest industrial vacancy rate in the US. At the same time, new construction activity is down from the five-year average. This year, 4.4 million square feet will deliver into the market, increasing the industrial stock by .5%. That is down by about 400,000 square feet from the five-year average. About 60% of the product under construction is already pre-leased.