Dermody Bets Big On The Inland Empire
Reno, Nev.-based Dermody Properties has actively acquired both land and buildings in the Inland Empire over the past several months. The national logistics real estate, development and management company is currently pursuing three major projects within this hub.
The company is target investments in fully entitled land for new industrial development, while also seeking value-add opportunities by acquiring existing, well-located industrial properties in need of renovation or that may have existing or upcoming vacancy.
Dermody acquired 19 acres of fully entitled land in the meridian Business Park in Riverside late last year. Construction has since commenced on a 262,260-square-foot distribution building. Soon after, the company also acquired a 265,500-square-foot vacant building in Fontana, followed by the acquisition of 50 acres of fully entitled land in the Rialto Renaissance, a master-planned business park located in Rialto, in early 2019. The firm plans to develop more than 950,000 square feet across four buildings at the Rialto park this year.
The Inland Empire land market is notably constrained. It is an ideal location for opportunistic investors to acquire fully entitled sites that allow them to quickly start construction and avoid the long entitlement process, which is often required for new development sites in the Inland Empire.
Dermody focuses on acquiring assets or sites ideally located to serve its customers with major distribution needs or for last-mile, ecommerce-driven logistics. The Inland Empire industrial market continues to expand and includes growth of mid-sized and smaller industrial and distribution companies. It also includes large bulk distribution facilities for ecommerce companies serving local, regional and national logistics needs.
The industrial market’s recovery from the Great Recession was driven by the larger distribution users, many of which were focused on ecommerce uses. Now with a strong economy, the market demand has expanded to include small- and medium-sized tenant spaces. Dermody aims to invest in and develop buildings to quickly meet the needs of customers ranging from large warehouses to smaller, ideally located last-mile facilities.
As ecommerce retailers look for last-mile distribution facilities close to their customers, Dermody is often looking at older, well-located buildings that need major upgrades as part of its acquisition strategy.
One example is the newly renovated 265,500-square-foot building on Miller Avenue in Fontana, which is scheduled for completion this May. After buying the 30-year-old building in December 2018, Dermody is installing an upgraded ESFR fire-suppression system, LED lighting and other major capital improvements. The building may be divided between two users.
Last-mile facilities may need more parking to serve the larger number of employees required to pick, pack and deliver smaller orders for consumers. Some last-mile buildings may not require the higher clear heights of larger buildings because they are often likely to be fed from traditional bulk distribution facilities.
Within the Southern California market, Dermody has found that, in addition to buying existing buildings, acquiring fully entitled land for development provides the best speed-to-market strategy for a new building development.
LogistiCenter℠ at Rialto is by far the largest project Dermody Properties has undersay in the weestern reaches of the Inland Empire. The company started construction on the 411,330-square-foot building in mid-March, with delivery expected late in the fourth quarter of 2019. Also on the drawing board are three more buildings in a second phase at LogistiCenter℠ at Rialto consisting of 202,260 square feet, 258,737 square feet and 79,430 square feet. Dermody bought the 19 acres of fully entitled land for the project at Renaissance Rialto Business Park in December and moved quickly to break ground before the end of the first quarter.
LogistiCenter℠ at Park Meridian, a 257,260-square-foot logistics facility on 13 acres in Riverside, is also expected to be ready for delivery in early May. Dermody continues to scout fully entitled land where it can begin construction quickly. that strategy—dubbed the “just-in-time land”—reduces risks and costs that accompany the entitlement process throughout Southern California.
The supply of fully entitled industrial land in the market is limited, with lots of competition among buyers. While limited supply has pushed developers’ costs upward, rents have increased sufficiently to keep pace with the higher costs, notes the Ontario office of CBRE. The office estimates vacancy rates for the western submarket of the Inland Empire at 1.9 percent, which is near an all-time low. The historic and current strong market fundamentals, as well as the resiliency of the Southern California market, are the reasons Dermody Properties has chosen to invest in the region.
For these reasons, the firm is very bullish about the Inland Empire and overall Southern California market. Activity is extremely high, and we view it as a very strong, vibrant market.
Author: Pat Gallagher