Blog #Warehouse

*Source: Lee & Associates Q3 2025 North America Market Report

The report from Lee & Associates discusses the implications of the Federal Reserve's "higher for longer" interest rate policy on commercial real estate (CRE) investments in 2025. Following a modest 0.25% rate cut in September 2024, bringing the benchmark to 4.00%-4.25%, the Fed signals cautious easing amid persistent inflation (core at 3.1%, headline at 2.9%) and internal debates on neutral rates (ranging from 2.5% to 4%). This environment shifts CRE from momentum-driven to performance-based strategies, with elevated borrowing costs (often >6%) repricing risk, portfolios, and values. Key themes include structural rate pressures, refinancing crises, sector divergences, cap rate tensions, and adaptive investment approaches.

Key Challenges

• Persistent Rates and Inflation: Sticky inflation in housing and services keeps rates high, with 10-year Treasuries near 4%. Lenders demand stronger sponsorship, conservative leverage, and NOI stability, leading to tighter spreads and shorter terms. The recent cut offers short-term relief but minimal impact on long-term capital.
• Refinancing Risk: $1.5 trillion in CRE loans mature by end-2025, prompting short-term extensions. Properties from peak eras face shortfalls, especially in office and multifamily sectors. Markets like Dallas, Atlanta, and Phoenix see stretched debt-service ratios, forcing sales, payoffs, or defaults.

Sector-Specific Impacts

• Office: Undergoing restructuring with vacancies >20% in cities like Denver, Chicago, and San Francisco (especially Class B/C). Flight-to-quality persists, but even premium assets face tenant risks. Conversions to lab/residential/flex space rise, with trades at 30-70% discounts from peaks.
• Multifamily: Favored but divergent—urban cores (e.g., New York, Boston, LA) stabilize with low vacancies; Sun Belt oversupply (e.g., Austin, Raleigh) leads to concessions and 10%+ vacancies. High costs, rent caps (e.g., Washington's ~9.7% in 2026), and extended lease-ups complicate deals. Private buyers target below-replacement-value assets.
• Industrial: Remains strong but cooled, with national vacancy at 7.4%. Big-box absorption slows in Phoenix and Chicago, but infill/last-mile/flex/cold storage thrives in constrained markets due to tenant retention and limited supply.
• Retail: Resilient with 4.3% national vacancy. Grocery-anchored and experiential assets outperform in Miami, Charlotte, and San Diego. Bifurcation exists: outdated centers in tertiary markets soften, while cash-flowing properties attract private capital.

Cap Rates and Valuation

Cap rates appear stable nationally but mask a buyer-seller standoff—sellers cling to peak pricing, buyers factor in risks. Tension persists into late 2025, especially in multifamily and industrial, with repricing often subtle rather than overt yield shifts.

Investment Strategies for the New Normal

Investors shift from Fed-pivot anticipation to disciplined execution:

• Prioritize In-Place Cash Flow: Stabilized income hedges against costs and dislocations.
• Operational Execution: Focus on leasing, expense control, and targeted repositioning over major capex.
• Underwrite Exits Upfront: Deals must stand alone, assuming full-cycle ownership.
• Creative Financing: Use seller carrybacks, preferred equity, and hybrids to bridge gaps.
• Value-Add Focus: Target assets with fixable issues (e.g., leasing friction) without overcapitalizing.

Conclusion

The report emphasizes CRE's maturation in a rate-sensitive era, rewarding pragmatism and local insight. The Fed's cut boosts confidence modestly, but elevated rates are the baseline—opportunities lie in fundamentals, not speculation. Insights from Lee professionals highlight fragmentation and selectivity.

16400 Garfield Ave, Paramount, CA 90723

Lee & Associates is proud to present an outstanding owner-user or investment opportunity in the heart of the Mid-Counties industrial corridor.

Property Highlights:

• ±27,750 SF freestanding industrial building
• Situated on an oversized ±77,145 SF (1.77 acre) M2-zoned lot
• Large fenced, paved, and gated yard
• Ample parking with 56 marked spaces
• Two (2) dock-high loading doors
• Excellent visibility and frontage along Garfield Avenue
• Immediate proximity to the 91 and 710 Freeways

Pricing:

• For Sale: Price Negotiable – Owner is highly motivated – bring all offers!
• For Lease: Rate Negotiable
• OPEX: Only $0.17/SF – the lowest in the market!

This rare freestanding asset offers maximum flexibility with its generous yard, abundant parking, and prime location just minutes from major transportation arteries. Perfect for manufacturing or distribution.

Contact:

Ron Mgrublian

Principal | Lee & Associates 

P: (562) 354-2537 

E: rmgrublian@leelalb.com

DRE# 01902882

Virtual tour available – submit your offer today! 🚨

We are excited to announce the successful sale of Suite 18-C at 10680 Silicon Avenue in Montclair, CA – a pristine, brand-new industrial condominium totaling ±3,444 SF.

Property Highlights:

• Newly constructed with modern finishes
• Impressive high warehouse clearance
• M1 zoning for flexible industrial uses
• Located in a highly desirable business park setting
• Prime Inland Empire West location with excellent access to the 10, 71, and 60 Freeways

This sale underscores the continued strong demand for high-quality, new-construction industrial space in one of Southern California’s most strategic logistics corridors.

Congratulations to everyone involved in the transaction!

Interested in owning or leasing similar industrial condos in the Inland Empire? Contact Ron Mgrublian, MBA at 562.354.2537 or rmgrublian@leelalb.com for current opportunities.

AVAILABLE: ±27,750 SF Bldg on ±77,145 SF Lot

$0.16 OPEX

APN#: 7102-020-001

ZONING: M2

• Owner Motivated - Submit Your Offer Now!

• Large Fenced and Paved Gated Yard

• Abundant Parking – 56 spaces

• Two (2) Dock High Loading Doors

• Free Standing Building

• High Visibility

• Close to 91 & 710 Freeways

Key Points:

• Industrial space demand in Orange County declined for the ninth straight quarter in Q1.
• Asking rents dropped nearly 10% during the quarter.
• Net absorption was negative at 626,940 square feet in Q1.
• Previous absorption declines: 5.2 million SF in 2024 and 2.6 million SF in 2023.
• Countywide vacancy rate increased from 1.8% (record low) to 5.8% over two years.
• Business caution, fueled by last year's issues and election-related tariff concerns, continues to limit growth.

Two brand-new, high-image industrial condo units are now available in one of the Inland Empire West’s most desirable business parks.

Available Units:

• Unit 11-Q: ±2,400 SF – Offered at $395/SF
• Unit 20-A: ±3,699 SF – Offered at $400/SF

Key Features:

• Brand-new 2025 construction
• Impressive high warehouse clear height
• Ground-level loading doors
• Modern industrial entry with built-out office space & restroom
• Fire sprinklers
• M1 zoning (Montclair)
• Excellent access to the 10, 60, and 71 freeways

Located in a premier business park setting with professional landscaping and ample parking, these units are ideal for owners/users seeking quality, move-in-ready space in a high-demand submarket.

A full 3D virtual tour is available, showcasing the clean, bright interiors and efficient layouts.

For more information or to schedule a tour, contact:

Ron Mgrublian, MBA 

Principal – Lee & Associates 

562.354.2537 | rmgrublian@leelalb.com

Don’t miss this rare opportunity to own new-construction industrial space in the heart of Inland Empire West!

10680 SILICON AVE MONTCLAIR, CA, 11-Q

Industrial Condo

Size ±3,699

PROPERTY FEATURES

• Brand New Construction

• High Clear

• Highly Desirable Business Park Setting

• Great Inland Empire West Location

• Close to 10, 71 & 60 Freeways

South Bay Submarket Q1 2025 Overview Summary

• Vacancy/Availability: The vacancy rate rose to 5.6%, up 70 basis points year-over-year, with Carson (7.9%), Compton (9.7%), and Rancho Dominguez (10.8%) seeing the largest increases. High-end properties now take 12.2 months to lease, shifting leverage to tenants. Landlords are offering more concessions, with 10.28 million square feet of vacant/available space. The market needs to absorb 5.1 million square feet to return to a 3% vacancy rate.
• Rental Rates: Average asking rents fell to $1.61 NNN, down 1.4% quarter-over-quarter and 8.0% year-over-year. After a 118% rent surge from Q2 2020 to Q2 2023, increased vacancy (10 MSF added) is driving further declines until leasing rebounds.
• Construction: Construction totals 1.4 MSF, with 360,466 SF delivered in Q1. Seven buildings are under construction, but new starts are limited, and no projects are preleased. Developers are pausing, waiting for tenants or better market conditions, which may increase vacancy if leasing doesn’t improve.
• Leasing Activity/Absorption: Net absorption was positive at 561,683 SF, but cumulative absorption since Q1 2023 is negative at -4.7 million SF. Leasing volume hit 1.3 million SF across 103 transactions, below the historical 2.5 million SF quarterly average. Buildings now take six months to lease.
• Sales Activity/Investment Trends: Investor caution persists due to high interest rates and economic uncertainty, widening the bid-ask spread. Despite lower deal volume, the South Bay attracts capital due to high rents and limited land. The region is poised for an investment rebound as borrowing costs ease.

The South Bay market faces challenges with rising vacancy and declining rents but retains strong fundamentals for future growth.

Additional Reports for Midcounties, Central and Inland Empire Included.

Lee & Associates is proud to announce the successful leasing of a highly desirable ±6,670 SF industrial facility located at 1402 & 1404 Daisy Avenue in the heart of Long Beach, CA 90813.

This top-tier property, situated on approximately 0.3 acres, offered an exceptional combination of location and functionality that made it perfect for port-related and logistics users:

• Prime Location: Adjacent to the Port of Long Beach with immediate access to the 710 Freeway
• Functional Layout: Four (4) loading doors, secured fenced & paved yard, and two (2) street accesses
• Flexible Space: High-quality building divisible into two units
• Zoning: IG (General Industrial)
• Lease Rate: $1.50/SF Net | 3–5 year term

The property’s strategic proximity to one of the nation’s busiest ports, combined with its excellent freeway connectivity and secure yard space, attracted strong interest and ultimately led to a swift lease transaction.

Congratulations to Principal Ron Mgrublian and the entire Lee & Associates Long Beach team on another successful closing!

Looking for industrial space near the Port of Long Beach or throughout Southern California? Contact Ron Mgrublian at (562) 354-2537 or rmgrublian@leelalb.com for current availabilities.

• The Inland Empire West submarket experienced a stall in net activity during Q3.
• Subleases and renewals dominated top lease transactions.
• Vacancy rates increased slightly, while availability trended downward.
• Pricing remained steady, but tenant concessions (e.g., free rent, tenant improvements) have risen and are now widely expected.
• Industrial construction slowed significantly, with the development pipeline at 43% of its year-over-year level.
• Institutional interest in the market continues to grow despite reduced activity.

AVAILABLE: ± 36,000 SF Lot Land

BUILDING SIZE: ±18,000SF

ASKING PRICE: $298 PSF ($5,364,000.00)

APN#: 6129-006-020 & 6129-006-021

ZONING: LA Unincorporated M2

• Free Standing Industrial Building

• Fenced/Paved Yard area

• Dock High Possible

• No City Business Tax

• 3 Ground Level Doors/4 Bathrooms

• Solar Lighting

• Bonus Unfinished Mezzanine

• Glass Kiln/Oven

• Close to 110, 405, 91 and 105 Freeways