A new joint venture has $400 million up for grabs, and it’s coming for an often overlooked sector of the industrial real estate market.
Real Estate and Iconic actions have pooled funds to acquire smaller industrial lots in the $5 million to $30 million range for logistics tenants, particularly for vehicle storage, Commercial Observer has learned.
The JV is looking to buy in 25 markets and has already started, with several properties under contract in the Inland Empire where congested industrial markets surrounding Los Angeles found some reliefas well as in Coral Springs, Florida, where the joint venture acquired five acres of land in 12101 NW 42nd Street for $9 million.
Josh Patinkinwho was hired to lead Leste’s expansion as general manager of U.S. real estate in 2021, believes the smaller property sizes will serve tenants looking to store fleet vehicles.
“There is less open engagement for this type of asset class where the average deal size is $15 million,” Patinkin told Commercial Observer. “It’s a lot of work for a small transaction and we are ready to do the work and put together a portfolio of attractive assets that may be overlooked by the wider institutional market. It’s the same level of work to buy a $100 million warehouse as it is to buy a $10 million truck parking lot. Same effort, same third-party reports, same lawyers, brokers.
According to Patinkin, metropolitan areas and smaller ports are on their radar, including cities like Savannah, Ga., or Charleston, SC, which still see a large amount of cargo tonnage.
Tim Bishop, founder and CEO of Iconic Equities, however, said there are a number of challenges in reclaiming a property and using it for logistics tenants. Many municipalities have zoning ordinances against vehicle storage, which is not considered an economic benefit to surrounding communities.
While the Coral Springs site serves as storage for 289 tenants with boats, trailers, RVs, jet skis and other utility vehicles in Broward County, the joint venture would ideally find a single tenant to manage space.
The joint venture is also targeting the Phoenix metro area, which has seen population growth and serves as a gateway for cargo to and from ports.
“[Phoenix] has very strong demographics and labor pools that make it a [alternate] option in Los Angeles, because that’s kind of a tapped market,” Bishop told CO. “A little more land available, great road infrastructure, we really like that market.
The increasing lack of industrial space due to the growing demand for e-commerce during the pandemic has continued to put immense pressure on the market not only to find more space, but also to build more.
Average industrial rents were recently recorded at $6.47 per square foot and vacancy rates remained at 5% in April as the construction pipeline had more than 640 billion square feet of additional space underway. , CO recently reported.
Mark Hallum can be reached at email@example.com.