The most active industrial property buyer in Southern California has made its latest big-ticket purchase to cap off 2024, underscoring an industry dealmaking rebound that has gained traction in recent months.
Rexford Industrial Realty shelled out $137.2 million to acquire a 300,000-square-foot warehouse in Los Angeles, the most expensive single-property industrial deal in the region this year, according to CoStar data.
The property at 2501 W. Rosecrans Ave. in Compton was also home to one of the top industrial leases for Los Angeles this year when fast-growing freight management firm Forward Air inked a deal for the entire site in April.
Real estate investment trusts like Rexford are increasingly driving industrial transactions nationwide, said Jesse Gundersheim, CoStar's senior market analyst for Los Angeles. Rexford was the second most active buyer of U.S. industrial real estate in 2024 after EQT Exeter, a fellow REIT.
"REITs like Rexford were active and bought more than they sold," Gundersheim said.
Industrial acquisition activity is heating up as buyers start to take advantage of lower borrowing costs following recent interest rate cuts, as well as lower purchase costs, driven by a slowing industrial market that's now beginning to gain steam.
Still, Gundersheim pegged Los Angeles as the weakest industrial market in the nation due to its record-setting pace of tenant move-outs.
Tenant expansions
Rexford acquired the South Los Angeles property from JPMorgan Chase for $457 per square foot, higher than the area's average sale price of $303 per square foot.
Nationally, industrial sales volume reached nearly $60 billion through mid-December, already matching the total value exchanged last year, according to CoStar research.
In Los Angeles, industrial property sales volume tumbled 40% year over year in 2023 to $5.2 billion. This year, that figure has fallen 21% to $4.2 billion, year to date. Asking rents for industrial space in Los Angeles have also fallen more than 16% from recent peaks due to rising vacancy.
There are bright spots on the horizon. Imports to Southern California's twin ports have surpassed prior peak activity levels reached in 2021 to 2022. That rising import traffic, coupled with a stronger pace of U.S. consumer spending, could boost occupancy in 2025, Gundersheim notes.
In a sign of that rebound, an e-commerce firm in November signed one of the largest industrial leases in Los Angeles in years. Distributor Win.IT America took the entirety of 151 Marcellin Drive, a just-built, 606,480-square-foot building at Majestic Realty Co.'s 290-acre Grand Crossing South industrial park in eastern Los Angeles.
In July, Forward Air relocated one of its California hubs from the 250,000 square-foot Dominguez Technology Center at 18055-18355 Harmon Ave. - Building 715 in Carson to the West Rosecrans property, boosting its footprint by 20%.
The Forward Air lease is just one example of tenant expansion in Los Angeles as inflation has subsided and imports to the Los Angeles and Long Beach ports have rebounded, according to CoStar research.
Still, tenants, including retailers, manufacturers and third-party logistics companies, vacated a record 15 million square feet in the fourth quarter, resulting in a net occupancy loss of about 4 million square feet and placing Los Angeles as the worst industrial market in the United States, according to CoStar data.
Trusts take over
Buyers are moving to take advantage of opportunistic pricing driven by recent market volatility, deals show.
Prologis, the biggest global warehouse owner and developer, said in its recent earnings call that it is "scouring the market for opportunities” as it sees a "very attractive market for acquisitions," CoStar News reported.
EQT Exeter, with headquarters in Radnor, Pennsylvania, is rapidly accelerating its capital deployment as it takes advantage of a “compelling time to invest in real estate” after a couple of years of volatility brought by rapidly increasing and higher interest rates, Henry Steinberg, the company’s global head, previously told CoStar News.
Institutional investors and REITs like Rexford are fueling industrial transaction activity in Los Angeles.
Such investors have accounted for 40% of acquisition volume in the market over the past three years, up from 30% in the past decade, according to CoStar research.
In addition to Rexford, other top industrial buyers in LA include CenterPoint, Invesco and Prologis.
Los Angeles-based Rexford, with a 50 million-square-foot portfolio spanning 424 properties, has been one of the most aggressive buyers of industrial real estate in Southern California during the past two years.
In March, the REIT purchased a 3 million-square-foot portfolio spanning Los Angeles and Orange County from global investment giant Blackstone in a $1 billion deal.