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Local Land Use Decisions, NIMBYism Are Leading Causes Behind Southern California’s Lack of Housing Production Across Price Levels

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Region is Further Behind Other Locations in Developing Lower-Income Housing; New Study Recommends Zoning Based on Existing Demand 
April 11, 2019— RIVERSIDE, Calif. (www.ucr.edu) — Local land use and zoning laws, as well as opposition to development by residents, are primary obstacles to building badly needed housing across Southern California, according to a new analysis released today by the UCR School of Business Center for Economic Forecasting and Development. The report examines Southern California’s progress under the state’s Regional Housing Needs Assessment (RHNA), which mandates how many and what types of housing units each jurisdiction in California needs to allocate and plan for in order to meet local housing needs at all levels of affordability.
Compared to all jurisdictions in the state, Southern California turns in an ‘average’ performance in terms of complying with RHNA’s reporting requirements but that is not indicative of average or more housing production. The analysis examines the Southern California Association of Governments’ jurisdiction under RHNA, which includes Imperial, Los Angeles, Orange, Riverside, San Bernardino, and Ventura Counties. To date, across these areas, less than 30% of the housing units mandated by RHNA for all affordability levels have been permitted for building.
“Because of the sheer size of the region, that statistic helps to illustrate just how chronically behind most jurisdictions in California are in terms of developing new housing,” said Adam Fowler Director of Research at the Center for Economic Forecasting and one of the report authors. “We’re now halfway through the current 8-year RHNA cycle and ideally would want to see a number closer to 50%.”
Fowler and his co-author Hoyu Chong a Senior Research Associate at the Center, emphasize that the Southern California region studied in the analysis is especially critical because it is home to more than 70% of the state’s population.
Given the dominant share of residents who live in the region, and California’s acute housing shortage, it’s particularly problematic that the analysis finds the area is further behind in producing low- and moderate-income housing. In fact, the only housing units that have seen significant progress, and are closer to meeting the RHNA mandate, are units that are affordable for those with above-moderate-income levels. Across the six-county Southern California jurisdiction, more than half (52%) of these units have been permitted compared to just 9% of very-low-income, 9% of low-income, and 16% of moderate-income units. Looked at another way, 77% of all the housing units permitted within the region under the current cycle have been for the above-moderate-income level despite the fact that just 42% of the units mandated by RHNA are allocated for that level.
The same general pattern persists in all of the six counties except Imperial, where just 4% of housing units for above-moderate-income households have been permitted versus 30% for moderate-income households. Los Angeles County has the worst imbalance, with 5 out of every 6 housing units permitted falling within the above-moderate-income level, even though just 3 out of every 7 housing units mandated by RHNA are allocated for that level.
According to the analysis, the key reasons behind the lack of housing production across income levels, but especially among lower-income units, include local opposition to development and local zoning and land use laws that are simply not conducive to developing affordable housing. Within the Southern California jurisdiction, for example, the median minimum lot size is bigger than in the rest of California. Moreover, both the minimum and maximum number of single-family homes allowed per acre is lower, and the minimum unit size is considerably bigger.
“There are some really fundamental obstacles facing Southern California and jurisdictions across the state in terms of developing smaller, denser, less expensive housing,” says Fowler. The study’s authors argue that local jurisdictions should take steps that include redefining housing needs, developing zoning regulations based on existing demand, and aligning housing development with projected demographic changes.
The new report follows an analysis released by public policy group Next 10 that examined all the state’s RHNA jurisdictions and found most to be behind in permitting new homes and significant numbers not participating in the reporting process at all.
The complete analysis, California’s Housing Crisis: Goals and Production in Southern California, is available here.
The UC Riverside School of Business Center for Economic Forecasting and Development is the first major university forecasting center in Inland Southern California. The Center is dedicated to economic forecasting and policy research focused on the region, state, and nation. Learn more at UCREconomicForecast.org

The Inland Empire Business Journal (IEBJ) is the official business news publication of Southern California’s Inland Empire region - covering San Bernardino & Riverside Counties.

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Commercial Real Estate Transactions

Avison Young brokers sale of a newly developed 205,589-sf industrial building in Perris, CA

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Avison Young announced today the sale of a 205,589 square-foot industrial building located at 100 Walnut Avenue in Perris, CA.

Avison Young Principals Cody Lerner and Stan Nowak represented the seller/developer, Los Angeles-based developer and investor Dedeaux Properties LLC. The buyer, a private investor from Southern California, was represented by Carol Taubman of Westgate Industrial Properties.

“When Dedeaux Properties acquired the land a few years ago, the Inland Empire East submarket wasn’t as strong as it is today. It has since become an increasingly desirable area as land becomes less available,” said Lerner.

Lerner added, “We are pleased that Dedeaux entrusted us to execute its exit strategy, which has successfully enabled the company to reach its financial and operational goals for this facility.”

Nowak added, “The Inland Empire continues to be one of the hottest industrial markets in the nation, where user demand is outpacing construction deliveries despite a robust development pipeline. We believe this trend will continue for the foreseeable future and will bolster development and capital investment despite macro-economic headwinds.”

The recently construction facility is situated on 9.56 acres, and includes a 36-foot clear height, 27 dock doors and 1,200 amps of power.

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Commercial Real Estate Transactions

Newmark Represents DCG Fulfillment in 190,000- Square-Foot Warehouse Lease in California’s Inland Empire

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Transaction Marks DCG’s 10th Building in California, Bringing Total Footprint to 3.4 Million Square Feet

Commercial Real Estate Transaction Alert

Newmark​ announces DCG Fulfillment has signed a 189,280-square-foot industrial lease at 13481 Valley Boulevard in Fontana, California. Newmark Executive Managing Directors Mark Kegans, SIOR and Ron Washle, SIOR represented DCG Fulfillment, a family-owned third-party logistics provider based in California’s Inland Empire.

“We are happy to have completed another successful transaction for DCG Fulfillment,” said Kegans. “With vacancy in the Inland Empire below 1%, options for tenants are few, and we were pleased to secure this prime distribution location for the company.”

DCG’s new space is part of a larger 600,080-square-foot industrial warehouse property located in the Inland Empire West. The property features cross-dock loading, approximately 5,000 square feet of office space, 35 dock-high doors, one grade-level door, 32-foot clear height, K-17 sprinklers, 800-amp power and parking for 116 automobiles and 150 truck trailers.

The property is situated just off Interstate 10 in Fontana, approximately 45 miles east of Los Angeles. The location provides access to major logistics and transportation locations along the West Coast, including Los Angeles International Airport and the Ports of Los Angeles and Long Beach.

According to Newmark Research, industrial vacancy in the Inland Empire remains the lowest in the U.S. at just 0.8% as of the second quarter of 2022. Occupancies of new construction deliveries propelled quarterly net absorption of 3.9 million square feet. There is currently 39.9 million square feet of industrial space under construction in the market, a record high. As the California Federal Reserve continues to increase interest rates to battle inflation, a gradual cooling of the unprecedented industrial market fundamentals across the U.S. is likely. However, as the nation’s top industrial market, vacancy will likely be better insulated in the Inland Empire if a recession occurs.

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Commercial Real Estate Transactions

SRS’ Investment Properties Group Brokers $35 Million Sale of Major Portion of One Eleven La Quinta Center, a 154,383-SF Retail Community Center in La Quinta, CA

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SRS Real Estate Partners’ Investment Properties Group (IPG) announced it has completed the $35 million sale of a 154,383-square-foot portion of One Eleven La Quinta Center, a retail community center located at 78959 CA-111 in La Quinta, CA.

SRS Senior Vice Presidents Chris Tramontano and John Redfield represented the seller, a Coachella Valley-based private family office. The buyer, Anaheim, CA-based Milan Capital Management, represented themselves. Terrison Quinn and Casey Mahony of SRS Real Estate Partners have and remain exclusive leasing agents for the asset which was 79% occupied at the close of escrow.

Tenants in the center that were part of the property sale include Ross Stores, Staples, Petco, Big 5 Sporting Goods, among others. The center is shadow anchored by tenants that include Stater Bros, Hobby Lobby, and Kohl’s.

Built in phases between 1992 and 2002, this is the first sale of the center since development over 30 years ago. One Eleven La Quinta Center totals 852,465 square feet and is situated on 19.57 acres of land. An irreplaceable highly-successful center, One Eleven La Quinta Shopping Center is located at one of the best intersections in all of the Coachella Valley, Washington & 111 visible to over 70,000 cars per day.

“The sale of One Eleven La Quinta Center was a very detailed complex transaction with several obstacles to overcome, including multiple loans on different portions of the property, a rising interest rate environment and a new Panera Bread pad development still in the contingency period that was critical to the proforma NOI that was underwritten.  I’m proud of our investment sales and leasing teams for coming together and providing excellent execution for both the seller and buyer,” said Tramontano.

“After 30 years of successful operation of One Eleven La Quinta, the seller was ready to pass the baton to a great southern California operator. This transaction had its challenges and many moving pieces, fortunately all outside of the high-quality real estate that was purchased. Chris Nichelson and the Milan Capital Management team demonstrated at great lengths their expertise in completing this transaction. This was a team effort and I’m excited to see the value Milan and the SRS leasing teams add to take the center to new heights,” said Redfield.

“We have been working with the seller and the SRS team for many years to acquire this well-located asset,” said Chris Nichelson, President of Milan Capital Management. “Their professionalism and diligence helped us overcome numerous challenges to get this deal done in an increasingly difficult environment. We are excited to have the opportunity to continue the original developer’s legacy, and to take this property to the next level.”

“One Eleven La Quinta Center is one of the preeminent retail centers for the Coachella Valley since its inception. It was important for the seller that the project’s legacy of success endures. Milan Capital Management’s level of sophistication and vision for the center made it clear they were the perfect buyer. The collaboration with the SRS capital markets team was critical to completing what was a very complicated transaction to the benefit of both parties. Under the stewardship of Chris Nichelson and Milan Capital Management’s team, we already have several new tenants in negotiation and the new Panera drive-thru is scheduled to open this fall,” shared Mahony.

Located along Highway 111, the region’s major retail corridor, the property is within a dense, affluent trade area with a population of 160,000 and more than 58,000 employees within a five-mile radius.

In 2021, SRS’ Investment Properties Group (IPG) and National Net Lease Group (NNLG) completed more than $3.1 billion in deal volume comprised of 899 transactions in 49 states, and currently have more than $2 billion in property on the market, with nearly 200 properties sold year-to-date in 2022.

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