Alere Lands $455M Refi for 3M SoCal Industrial Portfolio

Alere Property Group has landed a $455M loan to refinance a 3M SF industrial portfolio in Southern California, including eight buildings spread across Los Angeles and Orange counties as well as the Inland Empire. 

NJ-based PGIM Real Estate, the real estate arm of Prudential Financial, provided the fixed-rate loan. JLL arranged the deal. The buildings in the portfolio range from 50K SF to 900K SF.

“Bulk distribution properties are in high demand given the population base and activity at the ports of Los Angeles and Long Beach. We remain bullish on the industrial asset class,” said Trent Brown, executive director at PGIM, in a statement.

In January 2022, Newport-Beach Alere purchased a newly built 709K SF industrial campus in Riverside in Inland Empire.

Net absorption dropped to negative 2.3M SF in Q2 2023 in the Inland Empire from a first quarter level of 3.5M SF, according to a report from Kidder Mathews. According to the firm, this was the first negative quarterly absorption total for Inland Empire in more than 10 years.

A confluence of decreasing demand, higher delivery costs and interruptions at West Coast ports took the steam out of the market that encompasses Riverside and San Bernardino counties in Southern California, stretching from the Los Angeles city limits to the Arizona border.

The vacancy rate in Inland Empire, which was less than 1% a year earlier, rose to 2.9% in the second quarter, with the availability rate jumping to 9% in Q2 from the Q1 level of 7.9% in Q1. In Q2 2022, the availability rate stood at 4.6%.

Leasing activity dropped to 8.3M SF in Q2 from a first-quarter level of 9.3M SF, while asking lease rates ticked down to $1.41. Sales volume remained strong, growing to 3.9M SF from the Q1 total of 3M SF.

The Inland Empire submarket with the largest amount of existing inventory—Ontario, which has an estimated 117M SF of industrial space—registered the poorest net absorption in Inland Empire in Q2, a total of minus 1.4M SF.

The spread between growing supply and diminishing demand is likely to keep expanding for the rest of the year. New mega-warehouses continue to be delivered at a rapid clip in Inland Empire: 30M SF was delivered in 2022, more than 10M SF of new supply has come on line this year and the pipeline is full of projects.

Throughout 2022, most of the new deliveries were arriving pre-leased in the Inland Empire market, but the projects in the pipeline now are pre-leasing at a slower rate, according to Kidder Mathews.

“Through 2023, the Inland Empire industrial market is expected to experience an increase in vacant property as released construction projects come to completion. There will then be a period of decline as the new supply is absorbed and the pace of development comes to typical levels,” the Kidder Mathews outlook said.

“Supply growth will generate further upward pressure on vacancy at least through the end of the year, as the under-construction inventory is pre-leasing at a slower rate,” the report said.