By Erik Sherman | November 08, 2021 | Originally Posted on GlobeSt.com
The benefits of the new spending to real estate are largely indirect.

After more legislative drama than found in a West Wing rerun, the House passed the infrastructure bill, which now goes to President Biden’s desk for an expected signature.

The biggest story is not what it is, but what it isn’t. The original proposal was $2.6 trillion, according to a New York Times breakdown from August. The plan had included many items that wouldn’t make the cut: housing, schools, home- and community-based care, R&D and manufacturing, and more.

What passed was $1.2 trillion in spending. But it wasn’t all new, as $650 billion was extending previous spending. New spending of roughly $550 billion, mostly over five years, breaks out as follows, according to CNN.

• Roads, bridges, and major infrastructure: $110 billion
• Public transit: $39 billion
• Railways: $66 billion
• Power grid: $65 billion
• Electric vehicles, buses, and charging stations: $15 billion<
• Airports and seaports: $42 billion
• Resilience and climate change: $50 billion
• Water infrastructure: $50 billion
• Broadband: $65 billion
• Environmental spending: $21 billion
• Transportation safety: $11 billion
• Reconnect communities: $1 billion

Bloomberg News points to a number of funding sources for the bill, including unspent pandemic relief funds, assumptions of greater economic growth leading to increased tax revenue, states that ended unemployment benefits early and in doing so reduced the need for that federal money, spectrum auction sales, and more. There is disagreement over how much the measure will add to the deficit. The Congressional Budget Office expects the measure to add $256 billion over a decade.

Nothing in the bill directly speaks to real estate, but there are expectations that the industry would benefit indirectly. “While real estate is not included in the plan, real estate inherently needs strong infrastructure to be useful for tenants,” said a recent report from BlackRock.

For example, flood mitigation, new tax revenues to states, better transportation and communications, and improved power and water services are all positive for business in general, which would then presumably need more services from CRE.

One potential issue is that increased construction spending on infrastructure would increase demand for materials and labor that might drive up costs for CRE.

 

Are you looking to purchase or sell Orange County Commercial real estate? Do you need to lease Orange County commercial real estate? SVN | Vanguard provides industry-specific real estate services across a variety of asset classes throughout Southern California. Our market-specific commercial real estate expertise and experience are at the forefront of our practice. We advise clients to ensure informed decisions. Whether the property is in Orange, San Diego, Riverside, Los Angeles, or San Bernardino Counties, SVN | Vanguard offers our clients a competitive edge. The first step in our approach to every transaction is to listen. It is our job to understand client goals and how they relate to market conditions. We offer insight and guidance as we navigate each unique situation.

 

For more information, contact SVN Vanguard.

1. OFFICE DEMAND

• Demand for office space rose in August, following a sluggish July where the delta variant reduced the speed of growth across key economic indicators, according to the latest report from VTS. The VTS office demand index (VODI) rose by 3.65% month-over-month to 87 in August, the highest level since the pandemic began. To date, the VODI remains -13% below its pre-pandemic benchmark.
• On a year-over-year basis, office demand has risen by 235%, easing earlier concerns that the pandemic’s crushing of the office sector in 2020 would become a longer-term, secular shift. While lingering public health concerns and a new remote-work economy still present downside risks to the sector, demand has now climbed in eight of the past nine months and has recovered 84.4% of its post-COVID drop.
• Employment within “office-using” sectors rebounded in July (the latest month of data availability), charting an annualized growth rate of 4.3%, a stark contrast from the 0.8% growth rate observed in June. Using data from July’s jobs report by the BLS, the report notes that the largest increase in office-using jobs came from growth in information services employment, which saw an 11.8% annualized increase in July.

2.    CONSUMER SPENDING: RESIDENTIAL DISTRICTS VS. CBD

• A study by the Mastercard Economics Institute on consumer spending in New York City found that small-andmedium-sized businesses in residential districts have fared significantly better in their recoveries than their counterparts in central business districts.
• Spending at small businesses located in central business districts fell to 67% of their 2019 levels through April 2020. Through August 2021, spending at these firms has returned to 73% of 2019 levels. Comparatively, spending at businesses in residential neighborhoods, which fell to 85% of their 2019 levels through April 2020, have since grown past their pre-pandemic marks and sit 124% above 2019 their year-to-date mark.
• While the study focused on the NYC metro, similar trends have affected cities across the world. Globally, spending in central business districts remains roughly 33% below pre-pandemic levels through August 2021.

3.    HUD RULE ON TENANTS FACING EVICTION

• On October 7th, the Department of Housing and Urban Development (HUD) introduced a new rule that requires public housing agencies to notify tenants of public housing or project-based rental assistance programs of information related to Emergency Rental Assistance (ERA) programs before they can be evicted. The rule will not apply to recipients of Section 8 Housing Choice Vouchers.
• The new policy will also amend a standard eviction policy for public housing agencies, extending the window in which they must provide a written notice to a tenant regarding their eviction from 14 days before to the eviction date to 30 days.
• The new rule is effective immediately and comes amid a stubbornly slow rollout of funds from the ERA fund, a COVID-era federal program that facilitates rental aid to tenants impacted by the pandemic’s fallout. In discussing the implementation of this new policy, HUD states its intent to “act to prevent a wave of preventable evictions that will interfere with the program’s accomplishment of HUD’s mission.”

4.    CONSTRUCTION SPENDING

• According to the Census Bureau, the seasonally adjusted value of new US construction put in place totaled an annualized $1.58 trillion as of August 2021— a new all-time high and an 8.9% improvement from one year ago.
• Residential construction unsurprisingly posted the highest growth rate for the year ending August 2021, with the total value of new construction put in place rising a stratospheric 23.9%.
• New put in place construction for lodging and office properties both remain down on a year-over-year basis, falling 31.1% and 5.0%, respectively. While office construction has started to recover slightly, lodging continues to slide to new pandemic-era depths.
• Commercial construction, which includes both retail properties as well as warehouses and distribution facilities amongst other uses, is up 6.9% year-over-year.

5.   GOLDMAN CUTS US GROWTH FORECAST

• Goldman Sachs revised down its projections for 2021 US economic growth by 10 bps from 5.7% to 5.6%. Their forecast for 2022 GDP fell further, revised down from 4.4% to 4.0%. Notably, the bank revised up its projections for 2023 and 2024.
• According to the bank’s team of researchers, the updated forecast reflects the impact of a longer-lasting “virus drag” on sensitive consumer services alongside the weakening of reopening-influenced demand, which has driven the elevated spending seen in recent months.
• Further, economists have grown concerned about a prolonging of supply chain issues that have arisen during the pandemic economy, most notably a global semi-conductor shortage, which has contributed to price inflation in highly popular consumer products.
• Looking past 2021, the team factored in the tapering of fiscal stimulus and its likely impact on consumption. What remains to be seen, the researchers say, is whether consumer spending on services will pick up from pandemic lows to offset the likely fall in goods-related spending.

6.    MORTGAGE APPLICATIONS

• According to a recent survey by the Mortgage Bankers Association, mortgage applications decreased

by 6.9% week-over-week during the week ending on October 1st, 2021, falling to its lowest level in three months.

• This comes amid the backdrop of an increase in the 30-year fixed rate to 3.14%, its highest weekly mark since July. As mortgage rates rise, borrowers’ incentive to refinance decreases. The Refinance Index, a submetric within the survey, fell by 10% from the week prior and was 16% lower than the same week one year ago. Refinance’s share of mortgage activity now stands at 64.5%.
• Noteworthily, purchases have also fallen in recent weeks, but higher-balance loans driven by high sales prices and continuing home price appreciation are offsetting the impact of lower activity.
• The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA stands at 3.12% in the latest reading, while the average rate on 15-year fixed-rate mortgages stands at 2.45%.

7.  ZOMBIE PROPERTIES

• A newly released report by ATTOM finds that 1.3 million residential properties sit vacant in the US, representing 1.4% of all homes. However, on a more positive note, the total number of vacant homes in preforeclosure fell 6.7% quarter-over-quarter and 5.3% from a year earlier.
• The number of properties that are in the process of foreclosure has also fallen, down 3.7% quarter-overquarter and 0.2% year-over-year. The share of pre-foreclosure properties that have been abandoned, or socalled “zombie properties,” have dropped 0.1% quarter-over-quarter to 3.5%.
• On the state level, New York retains the highest level of zombie properties (2,053), followed by Ohio (939) and Florida (912), but each state’s high population and asset counts greatly contribute to their standing. On a quarter-over-quarter basis, Maryland saw the steepest relative decline in “zombie” foreclosures, falling 39%. Following next was Massachusetts (down 26%) and New Mexico (down 24%).
• The survey arrives just after the conclusion of a year-and-a-half-long foreclosure moratorium that sunset in August. Some states still maintained some forms of protection throughout Q3, while court rules and delays in certain jurisdictions have also stalled foreclosure activity. Activity in Q4 should help paint a fuller picture of the market’s post-moratoria trend.

8.    TREPP DELINQUENCY DATA

• CMBS delinquency rates continued to improve in September, falling 39 bps from August to 5.25%, according to figures reported by Trepp.
• Delinquency rates have now declined for 15 consecutive months following COVID-provoked jumps in May and June of 2020. While the pace improvement slowed to begin the summer of 2021, it re-accelerated in August and September. Compared to one year ago, the CMBS delinquency rate is down 3.67%.
• Retail and lodging CMBS delinquency rates have remained stubbornly high during the ongoing recovery. The Retail CMBS delinquency rate improved by 68 bps to land at 9.75%. Lodging CMBS delinquency rates also improved by an encouraging 60 bps from the previous month, bring the tally down to 11.45%.
• Industrial CMBS delinquency rates sit at 0.59% through September 2021. Even during the worst of last year’s shutdown, industrial CMBS delinquency rates never eclipsed 2%.
• Office CMBS delinquency rates fell by 10 bps in September to land at 2.02%. Following a slight uptick in July, Office CMBS delinquency rates have started to trend in a more positive direction again.

9.    EMPLOYMENT SITUATION

• Total nonfarm employment rose by 194,000 in September, far below the 500,000 jobs forecasted by the Dow Jones Survey of Economists and out of step with the average monthly growth of 561,000 jobs seen throughout 2021. Employment levels remain 5 million below the pre-pandemic high.
• The Unemployment rate fell by 40 bps to 4.8% in September, with an estimated 710,000 decline in the number of unemployed persons. The Labor force participation rate was little changed. Unemployment numbers, taken from the Household Survey, have marked notable discrepancies from jobs data, which is taken from the establishment survey, most likely due to data-collection constraints from the pandemic.
• One of the more notable points in the recent survey showed a decline in local government education employment, which dropped by a seasonally adjusted 144,000 amid the back-to-school push (when hiring in the sector typically picks up). The BLS notes that pandemic-related staffing fluctuations make interpreting the trend difficult, but it still raises concerns that the economy-wide labor market shortage could impact efforts to return children to schools and could further complicate the practicality of various vaccine mandates being instituted for teachers across the country.

10.   JOB OPENINGS AND LABOR TURNOVER SUMMARY

• Job openings declined to 10.4 million during the last business day of August, following an all-time high of 11.1 million in July, according to the BLS’ latest JOLTS data. The largest decreases were in health care and social services, accommodation and food services, and state and local government education.
• Hires fell to 6.3 million in August, down from 6.8 million in the previous month. Meanwhile, separations were little changed at 6.0 million. Quits climbed to an all-time high of 4.3 million during August— 17.7% above its pre-pandemic peak.
• Despite the decline, filing job openings remains a difficult task for firms across multiple industries. Combined with the underwhelming job growth numbers seen in the recent September jobs report, the resulting labor market shortage has challenged the stability of the economic recovery. Hiring difficulties have contributed to recent inflationary pressures and, in many cases, have prevented firms from taking advantage of existing sales opportunities.

SUMMARY OF SOURCES

• https://vts.drift.click/september-vodi (1)
• https://www.mastercardservices.com/en/recovery-insights/small-business-reset/challenges-and-opportunitiesaround-globe (2)
• https://www.federalregister.gov/documents/2021/10/07/2021-21960/extension-of-time-and-requireddisclosures-for-notification-of-nonpayment-of-rent (3)
• https://www.census.gov/construction/c30/release.html (4)
• https://www.marketwatch.com/story/goldman-economists-cut-u-s-growth-forecasts-for-2021-2022reports-11633907471 (5)
• https://www.mba.org/2021-press-releases/october/mortgage-applications-decrease-in-latest-mba-weeklysurvey (6)
• https://www.attomdata.com/news/market-trends/foreclosures/attom-q3-2021-vacant-property-and-zombieforeclosure-report/ (7)
• https://www.trepp.com/hubfs/Trepp%20September%202021%20CMBS%20Delinquency%20Report.pdf (8)
• https://www.bls.gov/news.release/empsit.nr0.htm (9)
• https://www.bls.gov/news.release/jolts.nr0.htm (10)

1. BEIGE BOOK – ECONOMIC ACTIVITY
• Economic growth downgraded slightly in July and August, according to the September release of the Federal Reserve’s Beige Book. Manufacturing, transportation, non-financial services, and residential real estate stood out as stronger than average sectors during the survey period. According to the analysis, the slowdown in economic activity was largely due to a weakening in demand for dining out, travel, and tourism, presumably stemming from the rise of the Delta variant.
• Supply disruptions and labor shortages also continue to dampen growth in some areas of the economy, particularly auto sales— which have been impacted by a worldwide microchip shortage, and home sales, which suffer from persistently low inventories. Both residential and non-residential construction rose across districts during the latest survey period, with loan volumes varying widely.
• All districts reported rising employment, but most also continued to note a persistent shortage of available workers that in many cases, are impeding business activity. Early retirements, childcare needs, challenges in negotiating job offers, and the presence of enhanced unemployment benefits were noted as the largest barriers constraining hiring.

2. VTS OFFICE DEMAND INDEX (VODI)
• Office demand decreased in July following six consecutive months of growth, according to the latest reading of the VTS Office Demand Index (VODI). The VODI dropped 1.2% month-over-month, the steepest fall in the index since December 2020. Office demand is up 252% year-over-year— largely a base effect from the steep fall in economic activity in early-to-mid 2020 but remains 16% below its 2018-2019 average. Office demand fell as low as -84% below its pre-pandemic benchmark during June of last year.
• As was the case during the last time the VODI fell this steeply on a month-over-month basis, the nation saw a significant uptick in COVID cases during July’s decline. According to VTS, 6 out of the 7 metros tracked in the survey reported an uptick in cases during the month of July, with Seattle being the lone exception.

3. CALIFORNIA ZONING LAW CHANGES
• On August 26th, The California State Assembly passed a bill that would allow for the construction of two-unit buildings on lots previously zoned for single-family housing only. If signed, the new law would supersede existing zoning rules on the local level.
• The new bill would allow for increased density in a state where restrictive zoning has led to some of the highest land values in the country, with median home prices in California rising by 27% in just the past year. The bill would also allow for homeowners to subdivide their current properties to up to 4 units on a single lot.
• The bill’s passing comes shortly after the August 23rd passing of a bill that makes it easier for multifamily construction by simplifying the approval process in some areas.
• If successful, the push for zoning law changes in California would be a big win for industry leaders and advocates pushing for reform to address the nation’s critical housing supply shortage. With national policy leaders signaling a desire to tackle housing affordability in the US, the California bill could become a framework for zoning reform across the country.

4. PROPOSED TAX CHANGES ON PARTNERSHIPS
• The Senate Finance Committee has begun drafting legislation that would introduce new tax liabilities on business partnerships, which could potentially impact how real estate transactions take place.
• The proposal would require partnerships to use the “remedial” allocation method during tax filing, which would limit the ability for partners to shift gains and their related tax liabilities between each other.
• Current law affords partners the choice of revaluing their assets upon the change in the interests of one of the partners, but the new proposal would require such revaluing. Critics note that the mandatory review would remove flexibility afforded to commercial real estate partnerships and could delay transactions. The National Association of Home Builders has announced opposition to the legislation.

5. JOBS REPORT
• The August Jobs Report arrived underneath most forecasts, adding just 235,000 jobs in the month according to the BLS. Economists surveyed by Dow Jones projected up to 720,000 new hires in the month, but public health fears and an activity slowdown that accompanied the emergence of the delta variant likely caused more of a shock than many predicted.
• For the first time in six months, the leisure and hospitality sector did not lead the nation in job growth, with professional and business services rising to the top in August with 74,000 new hires. Employment in leisure and hospitality was relatively unchanged and remains 10% below February 2020 levels.
• Major industries such as construction and wholesale trade also stalled, while transportation and warehousing, private education, and manufacturing posted gains.
• Wages have continued to rise, climbing 4.3% year-over-year in August. Average hourly earnings for all employees rose by 17 cents to $30.73 and have now climbed for five consecutive months.

6. DELTA VARIANT IMPACT ON HIRING
• The emergence of the Delta variant has renewed some American’s hesitations to return to work, according to new results from the Census Bureau’s Household Pulse Survey (HPS).
• Results from the survey conducted between August 18th-30th reported that 3.2 million Americans indicated they were not working due to being “concerned about getting or spreading the coronavirus”, up from a reported 2.5 million from the survey covering July 21st to August 2nd.
• Since tracking the metric began in April 2020, the number of American’s citing COVID-risk as a barrier to returning to work peaked at 6.24 million in July 2020 and has steadily come down since. After receiving a positive boost earlier this summer as vaccines became widely available across the US, the recent negative turn in sentiment reflects the fears surrounding the recent surge stemming from the delta variant.

7. RETAIL SALES
• US retail sales rose by 70 basis points month-over-month in August following a 1.8% decline in July. Sales exceeded most economists’ expectations, with the Bloomberg survey of economist predicting a 70-basis point drop in August.
• Some industry watchers point to back-to-school shopping as a boost to retail activity, while the report also showed strength in online retailers and furniture stores as home relocation saw an uptick during the month.
• The Delta variant’s effect on the service industry has also likely shifted consumer spending to other areas of the economy, and the latest report signals that retail goods have been a beneficiary. 10 of the 13 categories outlined in the Census Bureau’s report noted increases in August, with electronics and appliances, sporting goods, and car dealers being the only categories the declined.

8. A CASE FOR RETAIL RESILIENCY
• While the retail sector of Commercial Real Estate has been the focus of much concern during the pandemic, a recent analysis by Propmodo on the success of some retail property managers in recent months has provided a case for resiliency.
• Simon Property Group, the nation’s largest mall operator, reported total sales in June 2021 that were on par with June 2019 figures, according to the analysis. Year-to-date sales through June were reportedly 13% higher than the same period in 2019.
• Similarly, National Retail Properties, another large operator, reported 98.3% occupancy and 99% rent collection across their single-tenant retail properties.
• While the Retail Sector has faced some of the worst pandemic-related headwinds of any area of the US economy, record savings being held by consumers alongside the rebound in economic activity in recent months has provided a dose of stimulus to companies that have weathered through the storm.

9. HOME BUILDING GEOGRAPHY INDEX
• The Q2 Home Building Geography Index (HBGI) produced by the National Association of Home Builders reported a consistent level of activity in the single-family sector nationwide throughout the quarter, with the multifamily sector finding higher growth in counties where affordable housing is more readily available.
• The report’s findings show a shrinking of multifamily growth within the core countries of many metro-areas compared surrounding counties. In Q2, core counties accounted for 38.7% of multifamily construction activity, down from 40.2% in Q1.
• Further, the report finds that roughly half of the US population resides in the “least-affordable” counties according to the Index’s definition, which is based on price-to-income ratios derived from the 2019 American Community Survey. Just 2.8% of the population lives in the “most-affordable” counties.

10. DIVERGING INFLATION
• A recent analysis by Bloomberg indicates a diverging pattern in price increases across different metros dating back to the beginning of the pandemic.
• Utilizing data from the BLS, the analysis shows that the steepest local increases occurred in St. Louis, climbing from an inflation rate of 2.1% year-over-year in February 2020 to 6.6% in August 2021. Other notable standouts were the Houston and Atlanta metro areas, with Houston rising from just 1.5% in February 2020 to 5.3% in August 2021. Atlanta rose from a pre-pandemic rate of 2.9% to 6.6% in the latest reading.
• Conversely, Los Angeles saw the most tepid change in local inflation, rising from a rate of 3.4% year-over[1]year in February 2020 to 4.00% in August 2021. Phoenix followed, climbing from 4.4% to 5.1%, with San Francisco close behind— rising from 2.9% to 3.7%.
• Notably, the metros with the lowest increases all started the pandemic with higher inflation rates than those that sit at the top of this analysis. Soaring housing costs, which were already prevalent in metros like Los Angeles and San Francisco before the pandemic, alongside regional migration patterns that have increased
consumer demand in smaller metros, have likely contributed to the divergence.

Have questions about Orange County commercial real estate? Looking for Orange County commercial properties for sale and lease? Contact SVN Vanguard today.

Summary of Sources
• https://www.federalreserve.gov/monetarypolicy/beigebook202109.htm (1)
• https://vts.drift.click/august-vodi (2)
• https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220SB9 (3)
• https://www.finance.senate.gov/imo/media/doc/Wyden%20Pass-through%20Reform%20One%20Pager.
pdf (4)
• https://www.bls.gov/news.release/empsit.nr0.htm (5)
• https://www.census.gov/programs-surveys/household-pulse-survey/data.html (6)
• https://www.census.gov/retail/index.html (7)
• https://www.propmodo.com/understanding-retails-resilience-and-lopsided-recovery/ (8)
• https://www.nahb.org/news-and-economics/housing-economics/indices/home-building-geography-index
(9)
• https://www.bloomberg.com/news/articles/2021-09-16/inflation-soared-in-some-u-s-cities-barely-budged[1]in-others (10)

As if losing a major tenant at an investment property weren’t bad enough, investors need to be aware that when a building becomes vacant there could be added risks written into the property’s insurance policies. Vandalism, “malicious mischief” and other damages are just some of the exclusions of certain insurance policies.

By Tez Warmey | July 13th, 2021

If the past year has taught us anything, it’s that in the blink of an eye, lessors can unexpectedly lose even a top producing retail tenant. When a business declares bankruptcy, the business is removed from the property and the building may sit vacant for a long time. While business owners have to deal with huge losses in their revenue, property owners face a loss in their own revenue plus the stress that can arise from insurance coverage exclusions for their vacant buildings.

With all insurance companies, there are policy exclusions which are carefully noted on the policy itself. These policies must be read carefully before entering into any contractual obligation with an insurance provider. Before any policy is drafted, the insurance company makes its own assessment of the building. Here, the insurer weighs the risks and benefits involved in insuring a specific property. For instance, if a building is actively occupied and a tenant conducts business there regularly, the risks of vandalism and “malicious mischief” are relatively low. A vacant building, however, where no business activities take place, can be an easy target for vandals.

Insurance policies usually indicate that if a building is vacant or unoccupied for around 30 to 60 days, or more, then the policy won’t cover certain losses, such as damage done to the building by vandalism, “malicious mischief” and other destruction of property. It is absolutely essential for a property owner to be aware of these policy coverage exclusions as they vary from company to company.

This particular insurance exclusion has driven a lot of legal action between owners and insurance companies as of late. There is much back and forth between both parties in terms of the difference between “vacant” and “unoccupied.” If very limited activities are happening in the building, it might be “vacant” but not “unoccupied,” or vice versa.

Instead of budgeting for hefty lawyer fees, a smart investor should be proactive and make sure his or her insurance policy is clear with regards to unforeseen damages that may arise from vacancies. Is there a “vacancy exclusion” and if so, what isn’t covered in the vacancy exclusion?

In some cases, it may be a good rule of thumb for a property owner to notify their insurance provider if the building will be vacant or unoccupied. This information will usually lead to a reassessment of insurance coverage, which may bring about a renegotiation or cancellation of coverage, if the policy holder and insurance provider are not able to compromise on the contract revision. A savvy owner should read his/her policy and weigh out risks and benefits in relation to insurance policy exclusions before needing to file a claim, rather than after.

At SVN Vanguard, we are committed to helping property owners and tenants alike. Do you have a vacant Orange County commercial property? We are experts in Orange County Commercial Real Estate For Lease and Sale. SVN Vanguard has headquarters in Orange County as well as San Diego. We happily serve all of Southern California. Contact us for a property evaluation, leasing information and more.

FOR IMMEDIATE RELEASE

(SANTA ANA, CA, October 19th, 2020) SVN | VANGUARD one of the nation’s premier net lease brokerage firms, has completed the sale of the the 5,600 SF industrial warehouse located at 16065 Foothill Blvd in Sylmar, CA to a private buyer for $1.65 million. Hala Chalan of SVN | VANGUARD represented the seller, Truman Investment, LLC.

16065 Foothill Blvd is strategically located in north Los Angeles county with close proximity to several major freeways including the 210, 5, 405 & 118. The property is a free standing single tenant building that was built in 2005. The warehouse was previously occupied by the owner-user and remains in very good condition. The building features fire sprinklers, LED lighting, 200 AMPs, private gate and 8 parking spots with great security throughout. LAC2 zoning provides flexibility and permits diverse commercial use.

SVN is the only major commercial real estate brand that proactively markets all of its qualified properties to the entire brokerage and investment community. Participating in approximately $12.1 billion in sales and leasing transactions in 20187, SVN Advisors shared commission fees with co-operating brokers in order to close more deals in less time and at the right value for clients. Advisors also reap the benefits of our SVN Live® Weekly Property Broadcast, cloud-based leading-edge technology, and national product councils. This open, transparent and collaborative approach to real estate is the SVN Difference.

About SVN | VANGUARD
SVN | VANGUARD is an independently owned and operated SVN® franchise with offices located in Orange County & San Diego, CA. The SVN® brand is a globally recognized commercial real estate entity united by a shared vision of creating value for clients, colleagues and communities. Currently, SVN comprises over 1,600 advisors and staff working in more than 200 offices across the globe. SVN’s brand pillars represent the transparency, innovation and inclusivity that enable all our advisors to collaborate effectively with the entire real estate industry on behalf of our clients. SVN’s unique Shared Value Network® is just one of the many ways that SVN Advisors create outsize value for all stakeholders. For more information, visit www.svn.com.

About OUR COMMITMENT TO YOUR INVESTMENTS
We know what factors impact value.
The SVN | VANGUARD industrial experts are on top of Southern California market trends and forecasts. Whether you are leasing, buying, or selling an industrial building, our team is ready to provide in-depth expertise. Whatever your need, whether that be light industrial, flex space, large industrial park, or a free-standing net-leased building, we have the market knowledge to help you make the best decision. We bring value to our clients by monitoring specific factors that impact the industrial market and the ultimate function of the space, such as demographics, site plans, tenant mixes, tenant credit and traffic patterns.

By Mina Saeid | October 7th, 2020 1:00PM PST

SVN | VANGUARD is pleased to welcome Madeline Choi as a Commercial Real Estate Advisor. Choi is specializing in meeting the needs of international investors who own properties across the U.S. In addition to negotiating the sale of shopping centers, apartments, and restaurants, Choi will focus on hospitality, a product type in which she represented internationally known clients such as Wyndham and Sheraton Hotels.

“We are delighted to have Madeline join the firm. She is a dynamic individual who brings over 30 years of entrepreneurial expertise and unique business connections. Madeline and her clients will benefit greatly from the level of collaboration we can achieve with the 200 SVN offices nationwide that make up our network.” said Executive Director Cameron Irons.

Before joining SVN | Vanguard, Choi gained valuable industry experience at Intero Commercial in San Jose, CA. While at Intero, Madeline began marketing high-quality hotels and won $116M in listings in one year. Intero recognized Choi as their Best Commercial Agent of 2015 and presented her an Outstanding Achievement Award for Excellence. Among her achievements, Madeline was also once named Business Person of the Year by the Korean American Chamber of Commerce in Greater Santa Clara County.

Choi also has an extensive professional background in business consulting and operations both in the U.S. and abroad. She’s been the President of numerous tech industry businesses in Northern California and was most recently the CFO and COO of AppBanc, LLC, in Santa Clara, CA.

For details about any commercial needs, contact Madeline Choi at 949-303-7866 or madeline.choi@svn.com.

________________________________________

About SVN | Vanguard
SVN | Vanguard is a commercial real estate firm with offices in Orange County and San Diego, CA. We provide sales, leasing, and management services to clients in Greater Southern California. We combine a comprehensive national footprint with local decision making, expertise and market-leading execution. All SVN® Offices are Independently Owned and Operated.

Published Sep 16, 2020,08:10am EDT on Forbes

Expert Panel® Forbes Real Estate Council

In commercial real estate, buyers and sellers alike are often very eager to sign a contract and get the deal underway. However, this eagerness to close shouldn’t eclipse the need to properly review the terms of the sale.

Before signing any contract, performing proper due diligence is critical so that both parties understand their obligations and agree that the arrangement is fair. That’s why we asked 14 Forbes Real Estate Council members to share some red flags people should be wary of before signing a lease for a commercial real estate property. Their responses are below.

1. Overly Optimistic Business Projections

“I think the biggest red flag for a company signing a commercial lease today would be improper or too optimistic of an analysis of that business’s survivability. This is especially true if it could be negatively impacted economically once the government tapers and shuts down further stimulus support.”
– Rod Khleif, Lifetime Cash Flow Academy

2. Inability To Give Back Space

“Make sure you have a right to give back space in the first five years. At the same time, you should also have the right to offer first for adjacent space if it becomes available.”
– Didhiti Bhoumik, BLG

3. Unclear Landlord/Tenant Responsibilities

“Delineations of landlord and tenant responsibilities, defined by the terms of the lease, are rightfully coming under an increasingly large microscope. It is critical that adherence to health and safety guidelines and assignments of obligation are clearly defined in the lease. Failure to include this language widens the umbrella of legal exposure for both parties.”
– Kevin Maggiacomo, SVN International Corp.

4. One-Sided Provisions

“As with any contract, a huge red flag is one-sided provisions. Keep an eye out for things that only benefit one side and aren’t mutual. That’s a sign that a lease was probably written with many problematic provisions. Always have an experienced real estate attorney review any lease before signing to understand liability.”
– Jeremy Brandt, WeBuyHouses.com

5. Unfavorable Force Majeure Clauses

“Landlords and tenants must pay closer attention to force majeure clauses in commercial leases. Force majeure relieves a party of its performance obligations when certain circumstances arise beyond their control. Certain tenants have attempted to use this clause to exit leases in 2020, which has led to the creation of Covid-19 carve-outs. If they’re in your lease, make sure you can live with them.”
– Ian Formigle, CrowdStreet

6. No Demographic Or Analytical Study Results

“Due diligence is very important. Tenants who are new to the commercial market skip this phase and when they arrive at the signing of the contract stage, they believe everything has been resolved. They do not examine the demographic and analytical study results, leading them to discover that they will not get the revenue they expected. Once that happens, it’s too late and they are already bound by the contract.”
– Rodrigo Brandao Schiavo, Premier Capital Realty, LLC

7. Verbal Confirmations

“Commercial real estate should be treated like a business and you should never trust someone to keep their word. Everything must be in writing. If any property owner wants you to take their verbal confirmation, you shouldn’t work with them.”
– Raja Seetharaman, Propstack

8. Pass-Through Language About Planned Capital Projects

“Tenants should request a three-year operating expense history on the property and a list of any capital projects planned for the next year or two. Then, negotiate the pass-through language carefully in the lease. Landlords will attempt to recover as much of their costs as possible over the term of the lease.”
– Nathan Anderson, NAI Heartland

9. Vague Math Calculations

“After the tenant and landlord are named in a lease, everything else is a flag. Be clear in all terms including the math. If there are rental abatements, early termination clauses and fees or rent escalations, make those numbers part of the document. Net terms and core factor definitions are paramount, but agree on the math upfront. Write it out for 10 years and one headache is averted.”
– Kristin Geenty, The Geenty Group, Realtors

10. Lack Of Landlord Obligations

“A lease should include a listing of various landlord obligations. These obligations are typically defined within the term sheet during early negotiations. The term sheet will identify shortcomings of the building and/or required modifications, such as upgrades to restrooms, lobby areas and corridors, MEP Systems, demising walls, lighting, etc. Additionally, it will describe operational needs and amenity incentives.”
– Peter Ferzan, Ferzan Company LLC

11. Unclear Intended Uses

“I believe that any tenant should make sure that they can operate as planned in the space they have chosen. This includes your current operating needs and any future plans the space will have to accommodate. Check with the governing zoning body in the area of the property. Ensure you are open about your current operation and future plans as they relate to space.”
– Michael J. Polk, Polk Properties / Matrix Properties

12. Sloppy Documents

“A document that’s sloppy or error-ridden is a very bad sign. Everything should be correct and complete, including the identity of the owner. Ensure the property is in the agreed-upon condition so that you’re not liable. Make sure that the rent, who pays what expenses (such as maintenance), the number of people allowed to live at the property, etc. is lease assignable and spelled out. If the answer to any questions is, ‘I don’t know,’ run away!”
– Charles Argianas, Argianas & Associates, Inc.

13. Poorly Written CAM Definition

“How does the fine print read with regard to the CAM definition? What is included or not included? Poorly written and vague descriptions can cause confusion and conflict if an issue arises. Extremely lengthy definitions may include things that are uncommon like all major capital improvements. Is there a cap on the per annum increase? A major jump could affect a business owner’s budget significantly.”
– Catherine Kuo, Elite Homes | Christie’s International Real Estate

14. Failure Of Either Side To Hire An Attorney

“One common red flag is not hiring a proper attorney to review the lease for you! You should always have a local attorney to assist with reviewing and signing any new lease or sale.”
– Heidi Burkhart, Dane Real Estate