August 5-18, 2014 Section B

Real EstateQuarterly

Part of the Studio One Eleven architecture and urban design team is pictured outsidethe historic Ocean Center office building at Ocean Boulevard and Pine Avenue inDowntown Long Beach. The building is being converted to apartments and groundfloor retail. Pictured from left are: Michael Bohn, Linda Fu, Reed Suzuki and DavidSabunas. David Gray Architects is collaborating on the project with Studio One Eleven.Turn to Page 6-B for more information on this project and two others being coordi-nated by Studio One Eleven. (Photograph by the Business Journal’s Thomas McConville)

Real EstateQuarterly

1_LBBJ_August5_SectionB_LBBJ MASTER LAYOUT 8/2/14 3:02 PM

REAL ESTATE QUARTERLYAugust 5-18, 2014 Long Beach Business Journal 3-B

Commercial SectorsAre Slow But Steady

� By SAMANTHA MEHLINGER

Senior Writer

T he residential and commercialsectors of the Long Beach realestate market are experiencing

a mixed bag of activity this summer,with the most demand – evident in newconstruction, low inventory, strongsales velocity and increasing lease rates– appearing in the multi-family andindustrial submarkets.

The single-family market which lastyear made headlines for its double-digit price gains and flurry of sales hassince cooled off, with local, county andstate sources all reporting moderatingsales prices and slowing sales transac-tions. The California Association ofRealtors (CAR) recently reportedstatewide sales transactions decreasedyear-over-year for the 11th straightmonth in June, dipping by 4.8 percentfrom the same time last year. Month tomonth, however, sales increased by 1.5percent from May.

CAR also reported the Californiamedian sales price of single-familyhomes decreased by 2 percent in June

from the previous month, but increasedby 6.6 percent year-over-year.Statewide, the median price of homeswas $457,160 in June.

Los Angeles County seems to be far-ing a bit better in terms of price gainsthan the state as a whole. Statisticsfrom CAR show that single-familyhomes in L.A. County increased inprice by 5.9 percent from May to Junethis year and by 8 percent from lastyear. Robert Kleinhenz, chief econo-mist for the Los Angeles EconomicDevelopment Corporation, said gainsin home prices in Long Beach fromJune of 2013 to the same month thisyear were as much as 10 percent.

These figures represent a cool downin price appreciation compared withthe gains experienced in 2013,Kleinhenz said. “The housing marketwas on fire at this time last year,” herecalled. A year ago, the median priceof single-family homes in L.A. Countyhad increased by 30.8 percent from theprevious year – a much larger increasethan the gains experienced so far thisyear, he pointed out.

The total number of sales transac-tions in L.A. County dipped by 8.6 per-cent from May to June and by 6.1 per-

cent from last year. There were 181sales of single-family homes in LongBeach in June, compared with 227 inMay – a decrease of about 20 percent,Kleinhenz noted. While sales typically“hit a plateau” in June through August,he said the recent 20 percent dip insales transactions was “at the very leastatypical.” While he was not sure if thedecreasing sales velocity wouldbecome a trend, he said he did not con-sider “the housing market in danger ofturning south.”

Negative news about the economy

may have played into the sales slow-down, Kleinhenz said, referring to the2.9 percent decline in national grossdomestic product (GDP) reported forthe first quarter. “Even one piece ofnegative news on a significant indica-tor such as GDP shakes that alreadyfragile consumer and business confi-dence state,” he said.

Gary Painter, director of research atthe University of Southern CaliforniaLusk Center for Real Estate, pointedout that sales transactions might be lag-

Single-Family Home Sales Dip While Multi-FamilyAnd Industrial Markets Drive Real Estate Investments

More Buidlings Coming To Douglas ParkActivity continues to be brisk at the 261-acre Douglas Park north of the Long Beach Airport. Pictured here under construction are two medical office buildings totaling 90,000 square feet, which are scheduledfor completion in the first quarter of 2015. Both buildings have been sold to doctor groups, with the larger of the two – at 52,000 square feet – available for lease. Pictured left to right are: Shaun McCulloughand Jeff Coburn, principals with Lee & Associates Commercial Real Estate Services; Jan van Dijs, owner of JR van Dijs Builders & Developers; and Bruce Mapes, superintendent of construction with Millie &Severson General Contractors. (Photograph by the Business Journal’s Thomas McConville)

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REAL ESTATE QUARTERLY4-B Long Beach Business Journal August 5-18, 2014

ging due to a very low inventory ofhomes available for sale. Despite largegains in regional prices in the past year,Painter said many investors who pur-chased homes in recent years have beenrenting them out instead of reintroduc-ing them to the sales market, perhapswaiting for prices to appreciate morebefore selling.

The multi-family market, on theother hand, continued to be in highdemand both among renters andinvestors in recent months, and it mayfor the foreseeable future, according toPainter and Kleinhenz. This is largelybecause the millennial generation,which is even larger than the babyboomer age bracket, is expected togenerate strong demand for multi-fam-ily units for the next five to 10 years,Painter said. “Most of the models haveprojected the millennial generation willrent longer because [they will] delaymarriage longer than have previousgenerations,” he added.

Due to anticipated demand andalready low vacancy rates amongmulti-family units in Long Beach andregionally, developers have beeninvesting both in new construction ofmulti-family properties as well asadaptively reusing buildings that for-

merly had other uses, such as officespace, into apartments. Multi-familyproperties allow developers the optionto present units either for rent or forsale, giving them flexibility with mar-ket trends, Kleinhenz said. Severalmulti-family developments are under-

way in Downtown Long Beach, mostof which are being marketed to millen-nials.

Apart from the multi-family sector,the industrial market has been drivingnew construction in Northeast LongBeach, where developments at the air-

port-adjacent Douglas Park and vacantBoeing properties continue to crop up.Following the success of real estatedeveloper Sares-Regis’ Pacific PointeNorth and South projects at DouglasPark, the City of Long Beach recentlyapproved a Pacific Pointe East devel-

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Connie Wildasinn of MetroCal Brokers is pictured outside an 1,800-square-foot, three-bedroom, two-bath 1930s-era home in California Heights she sold recently.She said homes are staying on the market about twice as long as they did a month and a half ago. (Photograph by the Business Journal’s Thomas McConville)

BEACH COUNTYREAL ESTATE



opment at the southeast corner ofConant Street and LakewoodBoulevard. Plans include three indus-trial buildings, all measuring more than100,000 square feet.

The new development may not comeas a surprise considering current mar-ket characteristics – high demand forindustrial space with a very low inven-tory of available properties for sale.“We continue to have one of the tight-est industrial markets for what shouldbe obvious reasons, with our concen-tration of manufacturing activity,goods movement and other uses forindustrial activity,” Kleinhenz said ofthe South Bay and Long Beach. A sec-ond quarter CBRE, Inc. industrialreport pointed out that the South Bayindustrial market is closely tied to theports of Long Beach and Los Angeles,and as cargo volumes continue toincrease, demand for industrial spaceshould increase among third-partylogistics companies.

The office market, on the other hand,has yet to experience the kind ofdemand needed to recover from reces-sion losses, Kleinhenz noted. “As theeconomy went south, we saw a declinein the number of jobs in those indus-tries that typically fill office space,” hesaid. “Those job counts are comingback, but they are not where they werebefore the recession. For example, thefinance and insurance sector of local,state and national economies has beensuffering over the past year or so withjob declines due to consolidationamong financial institutions,” he said.In L.A. County, the number of peopleemployed by these industries decreasedby 1,500 from 2013 to 2014, he said.“That is a key industry that fills officespace but continues to consolidate.”

While the vacancy rate of officespace in L.A. County decreased from18.4 percent in 2013 to 17 percent inthe second quarter of this year, theSouth Bay (which includes LongBeach) experienced an increase invacancy from 20.2 to 23.3 percent,Kleinhenz said.

The retail market has been faring bet-ter than the office market – Marcus &Millichap reported the vacancy rate inthe South Bay and Long Beach regiondecreased by 10 basis points to 4.4 per-cent in the second quarter. “Both L.A.County and Orange County, includingLong Beach, are very good retail mar-kets in the sense that vacancy rates tendto be lower than they are nationally,”Kleinhenz said.

As a resident of Long Beach,Kleinhenz has observed new construc-tion of retail locally, which he saidpoints to positive trends in that sector

of the real estate market. He cited thenorthwest corner of Pacific CoastHighway and 2nd Street, where a newCVS/pharmacy, Gelson’s grocery store,Lucille’s Smokehouse BBQ and CityNational Bank were all constructed andopened within the past year.

Price Gains And Sales Transactions Slow In Long Beach Single-Family Market

ong Beach’s single-family realestate market cooled off this sum-

mer as “over-optimistic” sellers listedtheir homes at inflated prices and buy-ers took a step back, resulting in a slow-down in citywide sales transactions,according to local real estate agents.

“Sellers are unrealistic,” Phil Jones,owner of Coldwell Banker CoastalAlliance, told the Business Journal. InJune, the median list price of LongBeach homes had increased by 14 per-cent, but the actual sales price ofhomes increased by only 5 percent, hesaid. “That is a 9 percent gap,” hepointed out. “We are seeing sellersrealize less of a percentage of askingprice for the sales price. It wasn’t toolong ago that we were seeing sellers on

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� By SAMANTHA

MEHLINGER

Senior Writer

Studio One Eleven,the architecture andurban design firm whichis a division ofDowntown Long Beach-based Perkowitz+RuthArchitects, has designedthree new residentialdevelopments set totransform portions ofthe Greater Long Beachlandscape.

The firm has designedtwo multi-family mixed-use projects to meet theneeds of a growing baseof young professionalslooking to move into Downtown Long Beach,according to Michael Bohn, principal withStudio One Eleven. Both projects are replac-ing vacant and under-used office space.

Studio One Eleven is also set to impactSignal Hill after the Signal Hill CityCouncil selected its design for a new afford-able housing apartment community there.

Ocean Center Adaptive Reuse Project To Connect North And South Pine Avenue

One of downtown’s historic officebuildings is soon to be transformed into amixed-use project to attract young millen-nial tenants and help connect lower andupper Pine Avenue with designs by StudioOne Eleven. Levy & Associates, the ownerof the Ocean Center Building at 110 W.Ocean Blvd., recognizable for its tieredlevels and rounded tower with red Spanishtiles, hired the firm to create designs forthe adaptive reuse of the building intorental units with ground floor retail.

The 1920s-era building was constructedon a steep incline at the corner of PineAvenue and Ocean Boulevard, and stretchesto the bottom of the hill where it sits adja-cent to The Pike at Rainbow Harbor.

“It is not a very inviting gateway intoupper Pine,” Bohn said of Ocean Center, pointing outthat the ground floor has no signage, storefronts ortrees lining the sidewalk. This current environment maynot be appealing to conventioneers coming out of theLong Beach Convention & Entertainment Center,which is across Pine Avenue and slightly to the south,he noted. “The folks who come out of the conventioncenter look at Pine Avenue and they see the hill theyhave to climb and . . . kind of stay down by the water,”he observed. If these visitors were to climb up the hill,they would find the downtown core of Pine Avenue fullof restaurants such as the new BO-beau, The FederalBar, George’s Greek Café and many others.

“We are looking at having outdoor dining and mak-ing it enticing for people to walk up the hill. Then oncethey get to the top of Ocean [Boulevard] they will seethe other amenities on upper Pine [Avenue],” Bohnsaid. To accommodate outdoor dining, Studio OneEleven has created preliminary designs for parklets,which are extensions of the sidewalk into the street.Additionally, “We envision a major destination restau-rant on the ocean side of the project,” he said.

Although Bohn was not able to divulge many specifics

about the project’s design, he did share that the plannedapartment units “are going to be quite unique and inter-esting” because of Studio One Eleven’s intent to retainthe building’s historic character. Long BeachDevelopment Services Director Amy Bodek previouslytold the Business Journal that plans include 84 residentialunits, although Bohn couldn’t confirm a figure.

In addition to ground floor retail and residentialunits, the property features “amenities focused on mil-lennial residents,” Bohn said. As to what those may be,he hinted, “Downtown Long Beach has a very strongbike and pet culture and this project will continue tosupport and enhance that culture.”

Bohn anticipated the project’s final approval from theCity of Long Beach in the next four to six months.

Parc Broadway To Bring Millennials DowntownA Studio One Eleven-designed 222-unit apartment

complex called Parc Broadway, located at at 245 W.Broadway, is one step closer to realization now that pre-liminary work to demolish an onsite vacant office build-ing has begun, Bohn said. The developer is NorthernCalifornia-based Broadway Property Company, LLC.

Project completion is awhile down the road because the

demolition process isgoing to take longerthan is typical, Bohnsaid, explaining thatbefore the building isknocked down, contrac-tors are scouring it forreusable materials.“This will occur for sev-eral months because theidea is to recycle amajority of the materialsin the building,” he said.

After demolition iscomplete, a storm drainline beneath the build-ing must be rerouted tothe street. “We areworking closely withthe City of Long Beachand the county to move

those storm drain lines under the street,”Bohn said. After that, “The construction ofthe new development would occur proba-bly late spring to early summer next year.”

The design for Parc Broadway “is veryfocused on the millennials because they area very strong force and interested in livingin urban environments,” Bohn explained.Amenities built into the complex to attractthe millennial generation include a petgrooming station, a “bike kitchen” withtools to fix bikes, an art gallery and a fit-ness center. The site plans also includeground floor retail, which may include acafé to serve residents and nearby city hallworkers, he added.

Affordable Housing For Signal HillIn mid-June, the Signal Hill City Council

approved Studio One Eleven’s designs foran affordable housing project by developerMeta Housing. Plans for the project at HillStreet and Gundry Avenue include 72 one-,two- and three-bedroom apartments as wellas townhomes, Bohn said.

The site currently houses vacant and par-tially occupied warehouse buildings. “Thebuildings there are fairly dilapidated and arenot economically viable,” Bohn said. “Atleast half of them are closed or abandoned.”

Implementing the affordable housingcommunity should bring much needed life to the areaand hopefully discourage crime, Bohn said. “I thinkhaving eyes on the street and residents here will makeit a safer neighborhood,” he predicted.

“The quality of the project will look like a privatesector development,” Bohn said. “Our goal is always tocreate dignified affordable housing that weaves into aneighborhood and does not look like affordable hous-ing; it looks like market rate housing.”

The 72 units are to be spread across four buildings ofvarying heights and styles, Bohn explained. “They willhave common materials throughout, but they will havea distinctive style of their own,” he said. A commonbuilding, a deck area for grilling and a community gar-den are also included in the plans.

About a quarter of the property is being devoted to parkspace, Bohn said. “The majority of units front the green[space]. The lower units have private patios that front thegreen, and the upper units have balconies,” he said.

The developer is applying for state tax credits in2015, and if approved, construction may begin in 2016,Bohn said. �

Studio One Eleven-Designed Residential Projects To Attract Millennials, Create Affordable Housing

The 222-unit Parc Broadway apartment complex is planned for Pacific Avenue and Broadway in Downtown Long Beach.

The Ocean Center building at Pine Avenue and Ocean Boulevard will be converted to apartmentsand include outdoor dining to help “connect” the upper and lower portions of Pine Avenue.

Affordable housing units are planned for this Signal Hill project at Hill Street and Gundry Avenue.



average get anywhere from 98 to 100percent of their asking price. That is nolonger the case.” He cited the medianprice of Long Beach homes at$428,000 in June.

Much of 2013 saw double-digit gainsin home prices. In July of last year, forexample, Long Beach homes were sell-ing for about 15 percent more than theydid at the same time in 2012. Jonescharacterized last year’s single-familymarket as “overheated” due to specula-tive investors buying up homes for cashand then flipping and selling them,which drove up prices. The marketactivity and more modest price gains ofthis year mean that “we are now head-ing towards normalcy,” he explained.

Connie Wildasinn, owner ofMetroCal Brokers, said Long Beachhome sellers have been “shooting forthe stars,” because listing agents arenot counseling them about current mar-ket trends.

Buyers haven’t been willing to payinflated prices thanks to easy access tocurrent market information online andelsewhere, Jones said. As a result, thenumber of sales transactions in LongBeach slowed down as list pricesincreased. “Sales are down about 7 per-cent year-over-year,” he said.

A low inventory of homes for sale inLong Beach translated to few optionsfor homebuyers in recent months,which may also be impacting the vol-ume of sales transactions, Jones noted.“Probably a bigger restraint on overallsales than anything is that the biggestdemand appears to be in that $450,000to $750,000 range, but that is wherethere are the fewest listings,” he noted.

“Demand has definitely sloweddown,” Wildasinn observed. “I am see-ing properties that are staying on themarket now about twice as long as theywould have a month and a half ago.”She said the slowdown in sales transac-tions might be due to decreased afford-ability among buyers as home pricescontinue to rise.

In June, the average number of dayssingle-family homes remained on themarket was 72, compared with 53 daysin May and 48 days in June of last year,Jones said. The slowdown in salestransactions may be due in part to thesummer season, when the housing mar-ket tends to cool off a bit, he noted. Heexpected the market to pick up again incoming months.

Due to decreased affordability fordetached single-family homes, the


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local condo market has picked up,Jones said. “While people may wantsingle-family homes, those may beout of the price range for entry-levelbuyers, so they look to condos,” heexplained. “Condo prices are stillappreciating at a double-digit ratio.They were up 31 percent year-over-year in the first half of the year,” hesaid. Price appreciation has slowedsomewhat since then, but demand hasnot, he added. Wildasinn said she has

observed strong sales activity amongcondos in the downtown and EastVillage areas of the city in the pastfew months.

Young Professionals DriveDemand, New Construction In Multi-Family Market

ow that the economy has seen acouple of years of slow growth,

millennials have started to move out oftheir parents’ homes and into rental

units, economists and local real estateprofessionals observed. The trend isevident in Long Beach, particularlydowntown, where several plannedapartment complexes are being mar-keted to the millennial generation.

Downtown Long Beach Associates(DLBA), the nonprofit organizationoverseeing downtown’s businessimprovement district, recently reportedin its Downtown Economic Profile2014 that the majority of the area’s new

residents are young, career-orientedand ethnically diverse.

Johanna Cunningham, executivedirector of the Apartment Association,California Southern Cities, baseddowntown, observed that many youngprofessionals are waiting to buyhomes. “They are developing theircareers and preparing themselvesfinancially,” she said, adding thatyoung professionals may be rentinglonger to save up for a future single-

First Project In Long BeachTo Use ‘ParkingLifts’ Technology

� By SAMANTHA

MEHLINGER

Senior Writer

A casualty of theGreat Recession, a14,997-square-foot par-cel of land in the north-ern portion of the EastVillage Arts District laypartially developed fornearly a decade untildeveloper Urban PacificMulti-Housing, LLC,led by founder and CEOScott Choppin, decidedto give the project newlife.

The property at 431E. 6th St. changedhands a few times aftera 10-unit condo devel-opment began there in2004. The developertried to sell the landaround 2009 or 2010during “the worst yearsfor a real estate project,”Choppin said. The property was ultimately foreclosedon and listed on LoopNet.com some time in 2011, whenanother company bought it.

Choppin came into the picture at a Christmas party in2012, where a fellow developer let him know the land wasup for grabs again. Choppin had it under contract withpartner Pacific Partners Residential within a month withplans to develop a 30-unit multi-family rental projectcalled 6th Street Lofts.

As the owner of a Downtown Long Beach-basedurban development company and as a third generationLong Beach resident raising a fourth generation in thecity, the property’s location appealed to Choppin. “Ialways try to find projects that are in our [company’s]backyard,” he said. “We have a good understanding ofDowntown Long Beach and have a history there,” headded, explaining Urban Pacific has large multi-familydevelopments above the ground floor retail at down-town’s City Place Shopping Center. He said the “pri-mary driver” for his company to continue investing inthe area is that “Long Beach has a great downtown.”

Choppin was also interested in the property, which isnear the corner of 6th and Elm Streets, because he and hiscolleagues had observed a positive trend of real estate andurban activity moving towards the northern end ofDowntown Long Beach. “Part of the reason we pickedthis site is we always love to be in the heart of the up-and-

coming neighborhood and we will look for the movementor the trending towards a particular place,” he said.

Evidence of economic growth in the area is the buildingadjacent to the property, which houses a couture shoemanufacturing business. The business owner continues toinvest in the area by buying additional property, Choppinsaid. Another example is a retail hub a few blocks away at4th Street and Linden Avenue, where the popularFingerprints record store and Berlin Coffee House havebecome hot spots of activity, he noted.

Urban Pacific recently began construction on 6th StreetLofts after its subsidiary, Choppin Demolition Services,finished removing existing structures on the property. The30-unit loft development, with studio, one- and two-bed-room units, is scheduled for completion by February 2015.

The units are relatively conservative in size to meet thelifestyle needs of the most likely tenant – young profes-sionals, Choppin said. This demographic tends to spend alot of time away from home, socializing in nearby walka-ble areas, he explained. “The design is responsive to whatour research tells us about how somebody who is a mil-lennial lives, and it is not at home a lot,” he said.

The development’s design reflects the company’s urbanaesthetic, Choppin said. “We ended up with somethingcontemporary with an angular look to it,” he explained.“It has got a very contrasting color scheme, but then wesoften it with a wood accent on the ground floor.”

The four-story building is being built with an on-gradeparking structure. The development features 1.25 parkingspaces for every unit, which amounts to one guest spaceper four units in accordance with the Downtown Plan, adevelopment guide for the area meant to facilitate invest-ments, Choppin explained.

To maximize the amount of parking space and meet therequirements of the Downtown Plan, Urban Pacific devel-oped a unique solution – parking lifts. “To my knowledgewe are the first project in Long Beach to use that [tech-nology],” Choppin said. The independent stacked parkinglifts enable one car to park at the bottom level of the lift,which may then be lowered into a pit below so anothervehicle may park on the top level of the lift.

The loft project’s design includes amenities such as afitness space and a community lounge area with flatscreen TVs and a bar, as well as two outdoor socialspaces. One open-air deck space is being built on thethird floor with units surrounding it and includes anoutdoor fireplace and resort-style seating. A similarrooftop patio is also planned.

“I think we should be the first building to delivermarket rate units in downtown in this new [housingconstruction] cycle,” Choppin said. Many other multi-family projects are underway downtown as well,although he noted most of them have later completiondates due to their larger sizes. �

6th Street Lofts To Revitalize Vacant Parcel In East Village Arts DistrictScott Choppin is founder and CEO of Urban Pacific Group ofCompanies that includes business development, capital acquisition,and strategic planning. Here he is shown at the property at 431 E.6th St. that is being developed into a four-story, 30-unit apartmentcomplex. (Photograph by the Business Journal’s Thomas McConville)



family home purchase. These lifestyletrends are giving a boost to the localmulti-family market both in terms ofnew construction and rentals of exist-ing units, she explained.

Ratkovich Properties is one devel-opment f irm among many othersinvesting in the rental market inDowntown Long Beach. CliffRatkovich, president of the company,told the Business Journal that youngprofessionals are driving demand forrental units downtown.

“You have Generation Y or the mil-lennial generation who are starting toreach their prime rental years betweenthe ages of 25 and 35,” which is creat-ing upward pressure on demand, hesaid. “There hasn’t been any construc-tion of apartments in Downtown LongBeach since about 2006,” he added.“During that eight-year period therehas been a lot of pent-up demand forapartments . . . What is being builttoday is just starting to catch up withthe void in the market for supply.”

Cunningham estimated there are asmany as 2,000 new multi-family unitsplanned throughout Long Beach.Multi-family developments currentlyunder construction in the downtownarea are the 129-unit Urban Village at

1085 Long Beach Blvd., the 30-unit6th Street Lofts at 431 E. 6th St. andthe 69-unit Pine Square project at 250Pacific Ave. The Studio One Eleven-designed Parc Broadway at 245 W.Broadway with plans for 222 units isawaiting construction following thedemolition of an existing on-sitebuilding.

Ratkovich Properties’ adaptive reuseof the former City Hall East officebuilding into 156 units and 4,000square feet of ground floor retail is alsounderway, Ratkovich said. “We com-pleted all of the environmental remedi-ation work and we just recently pulledour building permit. We are startingwith the interior demolition and struc-tural upgrades,” he said. The develop-ment, called Edison Lofts, should becompleted by the end of 2015.

The Current, a high-rise luxuryrental complex at 707 E. Ocean Blvd.,broke ground in March, and construc-tion begins the first week of August.The 17-story tower with 223 units “willbe the first high-rise residential towerbuilt in Long Beach since the GreatRecession, and the first rental apart-ment tower developed since the 1970s,”according to Ryan Altoon, executive

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vice president for developerAndersonPacific, LLC.

Some developments are awaitingfinal approval from the City of LongBeach, including the adaptive reuseof the Ocean Center Building at 110W. Ocean Blvd. into 84 units, con-verting office space at the SecurityPacific National Bank building at 110Pine Ave. into 124 units and a new216-unit apartment complex byLennar Multifamily Communities at150 W. Ocean Blvd.

High demand for rental units hastranslated into high occupancy ratesamong Long Beach multi-family prop-erties, according to Robert Stepp,owner of multi-family investment firmStepp Commercial. “Occupancy isvery strong. On average we’re seeingbuildings with 97 or 98 percent occu-pancy,” he said.

Low vacancy has enabled landlordsto raise rents, according to SteveBogoyevac, vice president of multi-family investments for Marcus &

Millichap. As an example, Bogoyevacsaid he has raised the rent on one of hisown apartment units from $825 to$1,075 by implementing improvementssuch as granite countertops, hardwoodfloors and new cabinets. “That is apretty significant jump,” he said aboutthe rental increase.

In the past year or so, demand tobuy multi-family property in LongBeach has been increasing, but latelyBogoyevac has noticed a drop-off insales transactions. “The number oftransactions has definitely sloweddown,” he said, adding that sales havedecreased by about 20 percent sinceMay. He attributed the drop-off insales to a lack of available desirableproperties rather than a decrease indemand. “The buying side is pent upand desperately looking for product tobuy. It’s the sellers’ side of things thathas slowed things down,” he said.

Stepp identif ied more desirablemulti-family properties in LongBeach as Class A or Class B (high-quality) buildings either in East LongBeach or beach areas south of 4thStreet. Only about a dozen listings arecurrently on the market in those areas,he said. Citywide, 50 active listings ofmulti-family properties are for sale.

“Typically there are around 75 listings– that is your average,” he explained.

Due to high demand and low sup-ply, sales prices have continued toincrease. Bogoyevac said the salesprices for multi-family properties inLong Beach have increased 10 per-cent so far this year.

Both Stepp and Bogoyevac pre-dicted the demand for higher qualityproperties should remain strongthrough the year.

Leasing In The Office MarketRemains Stable, InvestmentSales Heavier In Downtown

� By BRANDON FERGUSON

Staff Writer

ommercial realtors are reportingcontinuing strength and stability

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“If you can find the product, peopleare buying,” Doug Shea, owner ofINCO Commercial told the BusinessJournal. “The highest demand [is]really for top quality institutional gradeassets,” he said. Shea further explainedthat the office sector, like retail andindustrial, is strong due to continued

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Johanna Cunningham is the executive director of the Apartment Association, California Southern Citiesbased in Downtown Long Beach. (Photograph by the Business Journal’s Thomas McConville)



low interest rates with the medicalindustry as a key factor driving theoffice market. “We all know medical isvery strong still,” he said.Last year, Lee & Associates

Principal Jeff Coburn and colleagueShaun McCullough secured the saleof two planned office buildings inDouglas Park – local medical compa-nies purchased both. The two build-ings, one of which is 38,000 square-feet and the other is 52,000 square-feet, are currently under construc-tion. The concrete walls for both havebeen completed, and according toRichard Lewis, managing member ofUrbana Development, interior workis expected to begin this fall. Thebuildings should be completed byyear’s end. Lewis added that thesmaller building is currently 100 per-cent leased.Coburn told the Business Journal

that he sees more leasing activityoccurring in suburban Long Beach,specifically around the airport. Whenit comes to the sales market, however,investors (as opposed to owner-users)have taken more action in downtown.“On the investment side, that is wherewe see a lot of the sales in this lastyear, especially in the larger invest-

ment stuff in Downtown Long Beach,”Coburn said. He cited the August 2013sale of the 396,972-square-footLandmark Square building, which soldfor $101,700,000, fetching $256 persquare foot.According to Cushman and

Wakefield’s 2nd quarter report, theoverall vacancy rate for the downtown

area is 20 percent, while the overallvacancy rate for the suburban area is17 percent. Cushman and Wakefieldmaintains that average rental rateshave remained stable in both markets.The report also stated that since lastquarter the downtown area experi-enced negative absorption of 40,460square-feet of direct space, while the

suburban area experienced negativeabsorption of 22,189 square feet ofdirect space. Robert Garey, senior director at

Cushman Wakefield, doesn’t see thisnegative absorption as a long-termtrend. “The market has remained rela-tively stable. I think this is just a little

Doug Shea, president of Inco Commercial, is pictured at the 30,000-square-foot office building at 1650 Ximeno Ave. near the Traffic Circle. The building houses com-panies such as Comerica Bank, Pacific Coast University of Law and Coldwell Banker Coastal Alliance. (Photograph by the Business Journal’s Thomas McConville)




of the hangover of the great recessionwhere some tenants have downsizedand given back some space where thespace wasn’t quite meeting theirneeds,” Garey said.

With continued reports of growingjob numbers, Garey expects the officemarket to improve and even suggested2015 could be a breakout year.

“When job growth occurs, officedemand follows,” Garey said. “Thecommercial real estate market tends tolag the general economy for job growth.Most owners don’t like to take on alarger commitment until they’re verycomfortable about what the future lookslike. The comfort level is getting better.”

In June, Cushman Wakefield sold a65,540-square-foot office building at115 Pine Ave. to Pinelux Associatesfor $10,410,000 at $158.83 per square

foot. In April, CBRE brokered thesale of 4060 Watson Plaza Dr., a71,450-square-foot building, whichsold for $16,000,000, or $223.93 persquare foot.

“Office buildings that are availablehave sold relatively quickly,” Gareysaid. “There’s strong demand forinvestors looking to purchase officebuildings. We expect that to continue.”

In addition to taking advantage oflow interest rates, Garey explainedthat investors are drawn to commer-cial real estate by a lack of stellarinvestment alternatives. “Short termmoney and banks, they pay nothing,”Garey said. “The bond market’s beenpretty good overall, but there hasn’tbeen great alternatives, so investmentin real estate is one that providessome upside potential.”

Despite Slow Down InVelocity, Commercial RetailMarket Remains Strong

ccording to Adam Friedlander,senior associate at the Long

Beach office of Marcus & Millichap,the sales velocity for retail establish-ments has been slowing. He attributedthis trend to a reduction in inventory.

“As far as retail sales, the velocityhas definitely slowed down. Therearen’t as many properties that areavailable for sale right now and theinventory is affecting sales,”Friedlander said.

Still, he added, the market remainsstrong.

“There are definitely transactionsgoing down, a lot of which are off-mar-ket opportunities as well as properties

that are exclusively listed. But becauseof the lack of inventory, people arestarting to find ways to access moreinventory by doing things unsolicitedand off the market,” Friedlander said.

Low capitalization and interestrates have led to pre-recession prop-erty values, Friedlander said, addingthat when single tenant investmentssuch as bank buildings and fast foodrestaurants come on the market, thesellers are inundated with offers.Marcus & Millichap recently closedescrow on a Church’s Chickenlocated at 1199 E. Anaheim St.,which sold for $1,385,000 with a4.95 percent cap rate.

Friedlander explained that salesprices, spurred by low inventory andhigh demand as well as low interestrates, have recently risen. “Prices in thelast 12 months have increased. I’d sayproperties have appreciated in value bythe cap rate compression that we’reseeing,” Friedlander said.

Marcus & Millichap is currently inescrow to sell a property located at3339 E. Anaheim St. The property,which has a Walgreen’s at the site, islisted at $8,750,000 with a 5.66 per-cent cap rate.

On the leasing side of the equation,Friedlander said the numbers remainsolid.

“If it’s a well located retail space withgood visibility, good traffic count, it’sin a good location, the leasing marketis very strong right now,” Friedlandersaid. “The tougher spaces to fill willcontinue to remain vacant, the econ-omy’s not yet strong enough to fill thatspace, and most of the tenants that arelooking for space in this market rightnow are food usage tenants.”

According to Brian Russell, vicepresident of Coldwell BankerCommercial Blair Westmac, thevacancy rate for retail space in theLong Beach area is hovering at around10 percent, though he added that it’s

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Adam Friedlander is a senior associate at the Marcus & Millichap Real Estate Investment Services regional office located at the World Trade Center inDowntown Long Beach. The office, according to its website, “provides real estate investment clients with the opportunity to buy and sell all types of commer-cial property, including apartments, retail, office, single-tenant net-lease, industrial, healthcare, self-storage, seniors housing, hospitality, land, manufacturedhomes and special assets.” (Photograph by the Business Journal’s Thomas McConville)



difficult to provide an accurate figure.“It’s much better than it was a yearago,” Russell said of the vacancy rate.“It might just get close to single digitsif we keep on this trend next quarter.”

Like Friedlander, Russell sees theretail market as strong. “Capital foracquisitions for lending and so forth isactually flowing nicely now,” Russellsaid. Still, he sees investors actingmore cautiously than they have inrecent quarters. “They’re asking a lotof questions and being very dutiful intheir analyses. It’s interesting, just twoor three quarters ago we saw investorssay, ‘That looks good – great location– let’s do this,’” Russell said.

Russell also sees the leasing marketas strong. “People are moving,” he said.“I’ve done five or six leases this lastquarter that are noteworthy.”

Among them, Russell said hesecured a lease in Carson for a60,000-square-foot industrial build-ing to be used as a distribution center.On the property, AT&T also plans toopen a Cricket Wireless store special-izing in prepaid cell phones in a1,400-square-foot space.

Russell also mentioned an end capspace located in the shopping centerat Bellflower Boulevard and Spring

street will soon house a SouthlandFinancial Services.

“That was on the market for severalyears, that was good to see that finallylease,” Russell said.

As for where he sees the highestdemand for retail, Russell said spotslike the eastside and Belmont Shore aretypical. He added, however, that down-town is also becoming more popular.“As more and more apartments getoccupied and so forth, people reallylike the downtown core,” Russell said.

In The Industrial Market, Low Interest Rates Fuel Demand

hile inventory is low in LongBeach’s industrial real estate

market, by all accounts the sales out-look remains positive. According toJohn Eddy, senior vice president ofColdwell Banker Blair Westmac, salevalues continue to climb and are near-ing 2007 numbers.

“Provided the economy stays strongand we’ve got favorable interest rates, Idon’t see any reason why it won’t con-tinue,” he said.

The leasing market hasn’t seen thesame amount of growth as the sales




market, Eddy said, but he added thatthe numbers were still reminiscent ofpre-recession figures. “Leasing is mir-roring sales as far as competitive mar-ket – low inventory, high occupancy – Idon’t think growth from a percentagestandpoint has been as significant com-paring lease rates to sales rates, butwe’re still achieving numbers that arein some cases equal or even greater tothe mid 2000s when we were at the topof the market,” Eddy said.

Eddy recently secured a lease at 166132nd St., a 3.5-acre lot with a 40,000-square-foot building, for .21 cents persquare foot. “We had several qualifiedtenants looking at [the property]. It wasabsorbed by a regional company thatdistributes hay to China,” Eddy said.

John Schumacher, executive vicepresident at CBRE Inc. South Bay,painted a similarly positive picture ofthe industrial market and explained thatlow inventory is driving a greaterdemand for properties, making sales thehottest part of the market right now.“Our product across the board in allclassifications, including Class A andClass B properties, everything that is forsale has action on it,” Schumacher said.

Schumacher’s office is currently inescrow to sell a 140,000-square-footbuilding located at 1483 West Via PlataSt., adjacent to the Long BeachFreeway. “We have that in escrow witha user. That’s been on the market for agood nine months and all of a sudden –bang,” Schumacher said. Though he

declined to disclose many details, theproperty is listed on loopnet.com for$18,849,240.

Garnering attention from local mediamore than a year ago, Schumacher and

colleague Brian DeRevere secured adeal involving a 1.1 million-square-foot former Boeing property, across thestreet from Douglas Park. MercedesBenz is currently leasing the property.

Last quarter, the Business Journal alsoreported that Schumacher closedescrow on a 3.5-acre parcel of DouglasPark land that will soon be home toShimadzu Precision Instruments. Thecompany is building a 58,796-square-foot structure featuring both office andmanufacturing space. Though hedeclined to offer specifics,Schumacher is continuing to build onpast successes, and told the BusinessJournal he is currently working onmore deals at Douglas Park.

“We have some things that we’reworking on, but are confidential, thatare going to continue to create employ-ment and quality operators in the park,”Schumacher said.

A second quarter report by commer-cial real estate company Lee &Associates explained that the South Bayindustrial market is experiencing itsthird straight quarter of positive absorp-tion. This is due, the report stated, toincreased cargo volume coming out ofthe ports. The report also pegged theSouth Bay area vacancy rate at 4.8 per-cent with Long Beach coming in at 3.5percent. According to Lee & AssociatesPrincipal Brandon Carrillo, sales arestrong and he expects the trend to con-tinue to be strengthened by clients whotake advantage of low interest rates andloans from the Small BusinessAdministration.

“We’re getting good demand ininquiries on our current properties,”Carrillo said. “Sales will continue to be

The sprawling Douglas Park north of the Long Beach Airport (A) continues to be a beehive of activity for industrial, office and commercial construction. Shimadzu Precision Instruments, Inc., broke ground lastmonth (B) on a 58,796-square-foot headquarters building for its aircraft equipment subsidiary that is relocating from Torrance. Across the street (C) on a former parking lot, Sares-Regis Group received planningcommission approval last month to move forward with the construction of three buildings totaling nearly 500,000 square feet. The 25-acre tract of land is known as Pacific Pointe East. Across the street fromthat project is one million square feet within two buildings that has been leased by Mercedes Benz. The buildings were previously used by The Boeing Company for commercial airplane assembly. Last year,Mercedes signed a 15-year lease agreement with Sares-Regis. The 52.2-acre site is slated to house Mercedes’ West Coast regional offices, a vehicle preparation center (VPC) and staff training facilities. Duringceremonies held in early June, then-mayor Bob Foster said, “This is going to be a great facility, not only for Mercedes-Benz but for the City of Long Beach. I believe you are going to see many lateral businessescome in to serve Mercedes and serve the workers here. I think this is the beginning of a real nice cluster in and around Douglas Park that will enhance the economy in Long Beach.” Behind the Courtyard LongBeach Airport, construction is underway on two medical buildings totaling 90,000 square feet of office space – also pictured on Page 3-B). (Photograph by the Business Journal’s Thomas McConville)

AB

CD

E

F

In an early July photograph by the BusinessJournal’s Thomas McConville, Mercedes carsare parked temporarily outside the future homeof Mercedes Benz West Coast regional offices.



strong as long as interest rates stay rel-atively low.”

But the recent passage of CaliforniaState Assembly Bill 1103 concernsCarrillo. The law requires landlords andbuilding owners to pay for a report dis-closing a building’s energy consumptiondata. “[The state] wants us as agents tobegin paying for a report or the landlordpays for the report then supplies thiseither to the tenant or the purchaser inregard to how energy efficient theirbuilding is,” Carrillo said. “We alreadyhave a sensitive recovery and throwingon additional costs, throwing on anothervariable onto the transaction slows downbusiness and has people rethink whetherthey want to do business either in a par-ticular city or state.”

Carrillo is also concerned about thethreat of a port trucker’s strike. “I hopeand pray that between the parties, theycan find a resolution without going toa strike, because L.A. and Long Beachhave a lot more competition than theyhad previously with the PanamaCanal, Baja, Washington, Canada.You’ve got all these places whereeveryone’s trying to cut into our mar-ket share and we shouldn’t give themthat opportunity,” Carrillo said. �

Leases AndTransactions

Inco Commercial announced the follow-ing transactions:

• The Benwell Portfolio – 101 apart-ment units in four complexes located at 26Alamitos Ave., 717 Medio St., 444Chestnut Ave. and 636 Chestnut Ave. – soldfor $10,250,000. Inco’s Eric Christopher,who represented the seller, said the unitswere built mainly in the 1920s and consistof primarily studios. “The portfolio salerepresents the paradigm shift in urbanhousing – smaller, more affordable unitslocated within walking distance to dining,entertainment and mass transit,”Christopher said in a statement.

Jupiter Holdings announced the follow-ing transactions:

• PROCEL Nurses & Allied signed alease with Jupiter Holdings to occupyspace at Topaz, an 11-story, 292-540-square-foot office building on the water-front in San Pedro. PROCEL, a medicalstaffing agency, is relocating its head-quarters from Hermosa Beach. PROCELwas represented by John Ottinger ofWest Coast Tenant Advisors, whileJupiter Holdings was represented by theCBRE team of Dave Smith, TimVaughan and Mike Harry. Other newtenants for Topaz include RockefellerPhilanthropy Advisors of L.A.’sWestside, and Blue Logistics, whichrelocated from the LAX area.

Coldwell Banker Commercial BLAIRWESTMAC announced the following trans-actions:

• The Harbor Dental Society signed a

five-year lease for 1,493 square feet ofoffice space at 4010 Watson Plaza inLakewood. The transaction, valued at morethan $150,000, was handled by BeckyBlair, John Eddy and Tyler Rollema.

• LMD Integrated Logistic Servicessigned a three-year lease for 59,979 squarefeet of industrial space at 1411 E. WatsonCenter Rd. in the City of Carson. Eddy,Rolema and Brian Russell handled thelease transaction, which was valued at$1.16 million.

• Pacific Captial LLC purchased an11,500-square-foot building in June at1300-1310 Long Beach Blvd. for$1,275,000. Blair, Sheva Hosseinzadeh andHoyt Hochman handled the transaction.

• Baja Sonora restaurant signed a five-year lease for 2,000 square feet of retail

space at 10900 Los Alamitos Blvd. in theCity of Los Alamitos. Steve Warshauerand George Bustamante handled thetransaction.

• A 7,096-square-foot mixed-use prop-erty at 3291 E. Artesia Blvd. in North LongBeach was sold for $1.26 million. Thetransaction was handled by Warshauer,Bustamante and Cameron Jacques.

Lee & Associates announced the follow-ing transactions:

• The Teachers Insurance andAnnuity Association of Amercia sold its28,480-square-foot industrial building at16604 Edwards Rd. in Cerritos toAluflam, a f ire-rated aluminum/glassconstruction firm. Lee & Associates’ JeffCoburn represented the Aluflam andCBRE represented the teacher’s group.

• Warren Distributing signed a five-year lease for 10,150 square feet of indus-trial space at 2648 E. 28th St. in SignalHill. Lee’s Coburn and Greg Gill repre-sented the landlord and Lee’s Jesse Laikenrepresented the tenant.

• PWP International recently leased1,196 square feet of office space at the 100W. Broadway building in Downtown LongBeach. Lee’s Coburn and Jeff McCulloughrepresented the tenant and WmCommercial represented the landlord.

• Alain Hirsch Contruction Grouprecently purchased a 5,847-square-footoff ice building at 1383 Redondo Ave.in Long Beach for $630,000. Coburnand Sean Lieppman represented thebuyer, and Jeff Bischofberger repre-sented the seller. �


August 5-18, 2014 Section B

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