3 Things to Know About OC Industrial in '16

OC industrial property sale prices and lease rates have reached new high-water marks, surpassing pre-recession peaks in many parts of the market. But where does it go from here? We asked Voit Real Estate Services board members, SVP Seth Davenport and EVP Mitch Zehner, what's on tap for 2016.

1. Players Will Need to Be (More) Creative

Prices will continue to rise, especially as interest rates remain relatively low, and so brokers, buyers and tenants will all need to get much more creative to make deals work, Seth (left) tells us. "We’re likely to see industrial users and owners in Southern California acquiring or leasing multiple buildings in various locations, as opposed to one central facility," he says. Next year is also likely to bring an increase of industrial buyers/tenants acquiring/leasing more space than they need just to get the location, then subleasing some of that space.

2. Investors Will Pay for Scale

In 2016, cap rates will continue to compress, and industrial investors will feel more pressure to pay up for scale, Mitch (right, above) tells us. "The larger the purchase, the less the return, but we don’t believe that will deter investors. Industrial assets continue to offer strong appreciation and value, and there's continued availability of institutional capital ready to enter the market."

3. The Looming Election Won’t Slow Anything Down

Traditionally, an election year means a slowdown for commercial real estate, Seth and Mitch say. Buyers and sellers typically proceed with caution until they know which way the political wind is blowing. But 2016 will buck that trend. This year the market is so hot that the two expect little to no impact from the upcoming election on the real estate climate next year.