Reemergence of CMBS Lenders Creates Increased Desire For Southern California Core Industrial
- Nov 29, 2010
By: Mario Mexia
With the reemergence of nearly a dozen CMBS lenders, competition is growing amongst capital providers to put their money to work. Interest rates are at all-time lows and underwriting parameters have begun to loosen. However, few investors have been able to take advantage of the improving capital markets.
Stymied by the limited availability of stabilized industrial product on the market, investors are growing feverish, combing through Southern California markets for “off market” opportunities to place their capital. Yet, many of these investors are significant owners as well, further perpetuating the unique dynamic of the market.
The increased availability of low-cost capital has ultimately stimulated investment sales activity in Southern California. However, the anticipation for abrupt improvement in market fundamentals will slow that process considerably.
Cash flow conscious owners will be less enthusiastic to transact if rental rates continue to drop and concessions remain a market standard. The hiatus in the delivery of new product for the period ahead should alleviate some of these concerns, but that will not happen overnight.
Inescapably, investor mentality must shift and yield expectation must normalize in order for there to be a huge increase in sales transactions. The arbitrage between buyers and sellers will narrow when investors grow impatient and begin to get more aggressive.
Mario Mexia and his son Matt joined NorthMarq earlier this year to start an investment sales practice in Southern California, with a focus on office and industrial assets. Mario has more than 30 years of experience in commercial real estate with an extensive track record of negotiation and representation for corporations and investors in the disposition and acquisition of industrial and commercial properties.