Santa Monica-based industrial real estate owner and developer Dedeaux Properties just wrapped up its busiest year on record, closing more than $800 million in transactions. It’s also venturing north to expand its deal footprint.
Dedeaux has a portfolio of approximately 6 million square feet of industrial space. In addition, the company owns more than 2 million square feet of industrial properties, including warehouse/distribution, truck docks, trailer yards, and cold storage facilities.
“We continue to focus primarily on Southern California,” said Dedeaux chief operating officer Alon Kraft. “The Inland Empire is most of it.”
Founded by Brett Dedeaux in 2006, Dedeaux Properties completed 14 acquisitions last year totaling $620 million in total budgeted project costs and approximately $65 million in recapitalizations of existing assets.
The Inland Empire is at the heart of Dedeaux’s story, with most of its 41 properties in the area.
“Ontario once looked like a suburb,” Kraft said. “Perris is now a well-defined industrial market. It continues to grow east and north. That will be where we can build a site that meets the needs of today’s users.”
Many of Dedeaux’s sites are terminal buildings, which are transitional delivery sites not designed for storage and range in size from 35,000 to 100,000 square feet. The high-speed building reaches 250,000 square feet.
“Terminals tend to be smaller,” Kraft said. “They’re not stocking a lot of product. It’s about getting product in from ports and rail and pushing it to other distribution facilities.”
Dedeaux is also expanding its Southern California base north, acquiring a 12-acre development site in Tejon Ranch in Kern County last February.
The site is entitled to up to 250,000 square feet of industrial development.
Portions of the 270,000-acre Tejon Ranch site, which includes nearly 6 million square feet of distribution centers, retail stores and multi-family housing projects, are under development. Dedeaux has submitted plans for a speculative dry bulk warehouse/distribution facility with 32 feet of clear height and redundant trailer parking on site. Currently under construction, the walls are sloping. The project should be completed within 9 to 12 months.
“The greater Los Angeles market is increasingly supply-constrained, putting upward pressure on rents, which in turn puts more pressure on supply chain costs,” Rishi Thakkar of Dedeaux Properties, which oversaw the acquisition, said in a statement. “Tejon Ranch’s strategic location south of California’s Central Valley has proven to be a superior value proposition for regional users who need to ship goods in the western United States.”
Dedeaux Properties doesn’t have many warehouses in its native Los Angeles, but the few it does have are located near its roots.
“The company started in Central Los Angeles from the very beginning,” Kraft said. “We do have some sites in Central Market. It’s hard to find lots of scale in Central Los Angeles.
Cold storage professional
The creation of cold storage facilities has become Dedeaux’s specialty.
“We’ve worked cold storage in Southern California and the Bay Area for many years,” Kraft said.
The company now has more than a dozen cold storage properties. Cold storage involves storing perishable items such as food, pharmaceuticals, and artwork within specific temperature ranges to maintain their integrity and quality.
Cold storage is in high demand as there are not many available.
“There’s a huge gap,” said Andrew Briner, Newmark’s executive managing director. “The supply of cold storage is sorely undersupplied that it is difficult to find suitable sites for basic zoning to build these facilities.”
Focusing on areas such as refrigeration is part of Dedeaux’s strategy.
“We’re trying to avoid being just a player in commodity warehouses, so we find ourselves in these niche spaces, whether it’s a dockside trailer yard, a high-speed logistics building, or cold storage, as a way to differentiate what we do and find It’s an opportunity to do better with our capital, our partners’ capital.”
Some of these opportunities include selling warehouses. Dedeaux Properties sold $122 million worth of properties last year.
“We will be opportunistically looking to sell assets,” Kraft said. “Between ourselves and the partners involved in our transactions, we seek to balance the types of returns we are trying to obtain. Where we can obtain strong returns, we will selectively sell those assets.”
Continue to expand
In addition to Kern County, Dedeaux hopes to expand beyond Southern California, with plans to expand its industrial ventures into the Bay Area and other parts of California.
“Our goal is to expand thoughtfully throughout much of California, including farther south,” Kraft said. “We have a site in San Juan Capistrano and we’ve been looking at some sites in the San Diego area.”
Market cycles will determine how much development Dedeaux continues to see in its pipeline.
The industrial market in L.A. County is tight right now, with a vacancy rate of just 1.4 percent in the fourth quarter, according to JLL. data. While vacancy rates have risen slightly over the past year, Mike Tingus of Lee and Associates LA North-Ventura noted that the industrial asset class remains healthy in the single digits.
“The market is still relatively strong,” Kraft said. “It’s arguably off the top. But it’s always hard to use the fourth quarter as a barometer for any year because you have the holidays. We continue to see interest in our builds. But at least in the past A couple of quarters will take longer to get the job done because people might be a little bit nervous given economic headwinds like the war in Ukraine, rising interest rates.”
Overall, despite the slowdown, the market remains strong as it emerges from Covid, Kraft said.
“We continue to see significant demand,” Kraft said. “A lot of people in the logistics space are still looking for a lot of space. There’s been some stabilization in the market, and we think that’s ultimately going to be good for the market, even if we don’t get to peak levels of activity.”
While a recession is likely to continue to threaten the economy in the new year, other key indicators remain positive, Kraft said.
“Consumer sales remained strong through the holiday season and are likely to remain strong through 2023,” Kraft said. “We may see a shift from large durable goods to small and other nondurable goods, which bodes well for industrial demand to remain strong. elasticity.”