By Jodi Summers

Last year, a total of $268 billion in investment grade real estate — properties valued at more than $5 million — were sold throughout the country. That is a 44 percent increase over the transaction volume in 2004, according to the National Association of Realtors.

Investment dollars continue to flow into Southern California’s industrial real estate market in 2006. And by all predictions, the California industrial real estate market will stay strong.

Office properties accounted for $99.7 billion in transactions in 2005 — a 34 percent rise from 2004. Los Angeles County’s vacancy rate fell to 11.5 percent from 14.1 percent a year ago. Average asking rents ticked up 9 cents to $2.14 per square foot per month. Orange County and the Inland Empire experienced similar shifts. Multi-family real estate sales topped $87 billion — an increase of 72 percent over the previous year. Industrial properties accounted for $35.5 billion — up 65 percent. Retail totaled $46.4 billion in 2005 — a 16 percent increase from the previous year.

According to the National Association of Realtors Forecasts: “… Demand is increasing especially for warehouse and distribution facilities, particularly at or near major ports of entry or distribution hubs. Much of what the United States is importing is arriving from China, which has resulted in congestion at major West Coast ports.”

National Association of Realtors industrial property forecast

#“The demand for industrial (warehouse/distribution) space will continue in 2006 with the vacancy rate falling to 8 percent by the end of 2006. Industrial markets at or near major ports will continue to have the best performances. It is expected that there will be a 20 percent increase in new industrial construction in 2006 to accommodate specific distribution requirements and to replace buildings that are now considered to be obsolete,” according to the National Association of Realtors.

To bolster that concept, First Industrial Realty Trust Chicago-based REIT recently paid $6 million to acquire a 125,000-square-foot warehouse on 6.4 acres at 18201 S. Santa Fe Ave. and plans to redevelop the site into an $18 million, 140,000-square-foot distribution facility, according to GlobeSt.com. The new facility will be geared toward companies shipping goods into the South Bay from the ports of Los Angeles and Long Beach. This property is much needed. The vacancy rate for the Rancho Dominguez industrial submarket stood at just less than 3 percent at the end of the first quarter, according to recent market reports.

Commercials and industrials are a strong area, and banks are clueing in to the commercial real estate industry’s impressive statistics. For the 30th consecutive quarter, the California Commercial Loan Delinquency Ratio is below one half of 1 percent, according to the California Mortgage Bankers Association. Roughly 99.86 percent of the California commercial real estate loans were either current or only one payment delinquent. This translates into a delinquency ratio of .14 percent — a three-year low ratio as of Dec. 31, 2002.

The strong state of the industrial market is also allowing for a diverse selection of financing packages from commercial lenders. Recently, the Hunting Oaks Shopping Center in Monrovia refinanced with a $51 million, 10-year, interest-only loan.

Jeff Randolph, president of Avalon, said the deal “pushed the envelope” by providing interest-only financing for a commercial property. Randolph noted that the purpose of the refinancing was two-fold. The center’s ownership wanted to lock in a lower interest rate and also to draw cash out in order to invest in other real estate projects.

Randolph said the fixed-rate loan, through Wachovia Securities, is at a “very favorable” rate and replaces an older fixed-rate loan. The rate for the new loan is fixed over Treasuries at “a very competitive spread,” he said.

Those types of loans are difficult to obtain, but the Huntington Oaks Shopping Center is “an exceptional asset,” Randolph said. The property is a 328,335-square-foot center at 1321 S. Mayflower Ave., where the 210 Freeway meets Huntington Drive.

Besides the high visibility location, the center’s owners also landed the loan because of the 23-year-old property’s successful track record of maintaining high occupancy. Its tenants include Toys “R” Us, Marshalls, Bed Bath & Beyond and Mervyn’s, along with restaurants and specialty stores.

Randolph notes that the center played a vital role in the redevelopment of Monrovia by attracting business and developers to the San Gabriel Valley and generating significant sales tax revenue for the city.

For more on Southern California commercial properties, there is a great information blog at www.socalindustrialrealestateblog.com.

(Jodi Summers is director of the investment division at Boardwalk Realty Santa Monica. For your real estate needs, e-mail Jodi Summers at jodis@boardwalkrealty.com, call 310-309-4219, or visit her Web site at www.santamonicalandmarks.com.)