Dedeaux looks north

Dedeaux Properties, a Santa Monica-based owner and developer of industrial real estate, wrapped up a busy year by closing more than $800 million in transactions. He has also entered the North to expand his deal footprint.

Dedeaux holds a portfolio of approximately 6 million square feet of industrial space. In addition, the company has an active pipeline of over 2 million square feet of industrial properties including warehouse/distribution, trucking terminals, trailer yards and cold storage facilities.

“We continue to focus primarily in Southern California,” said Alon Kraft, DeDeux Chief Operating Officer. “The Inland Empire is the biggest of that.”

In the year Dedeaux Properties, founded in 2006 by Brett Dedeaux, closed 14 acquisitions last year with a total budgeted project cost of $620 million and purchased approximately $65 million in existing properties.

The Inland Empire is at the heart of Dedeux’s narrative, with most of its 41 properties based on that region.

“Ontario once looked like a suburb,” Kraft said. “Perris has now become a well-defined industrial market. It continues to grow outwards to the east and north. That’s where we can build sites that meet the requirements of today’s users.”

Many of Dedeux’s locations range from 35,000 to 100,000 square feet of transit space in terminal buildings not designed for storage. The high-speed buildings will reach 250,000 square feet.

“The terminal buildings are going to be a little smaller,” Kraft said. “They don’t store a lot of produce. It is pushing products from ports and railways to other distribution points.

Looking to the north

Dedeaux expanded its Southern California base north with the acquisition of a 12-acre development site at Tejon Ranch in Kern County last February.

The site is eligible for up to 250,000 square feet of industrial development.

The 270,000-acre Tejon Ranch site is currently under construction with approximately 6 million square feet of distribution centers, retail stores and multifamily projects. Dedeaux submitted plans for a tentative dry bulk warehouse/distribution facility with a 32-foot clear height and over-sized trailer parking at the site. At present, the construction of tilting towers is in progress. The project should be completed in nine to 12 months.

“The Greater Los Angeles market is facing increasing supply constraints, putting pressure on rents, which in turn puts pressure on supply chain costs,” said Rishi Thakkar of Dedeux Properties, who led the effort, in a statement. “Strategically located in the southern part of California’s Central Valley, Tejon Ranch is a proven location that represents a superior value proposition for regional customers looking to move goods throughout the western United States.”

Dedeaux Properties doesn’t exactly own many warehouses in Los Angeles, but it does have a few of its own right next door.

“The company has been in Central LA since its inception,” Kraft said. “We have some sites in the central market. It’s been very difficult to find sites of that size in Central LA,” Kraft said, noting that land in the Inland Empire is more available and cheaper than Los Angeles.

Cold storage special

The creation of cold storage areas has become a specialty of Dedeux.

“We’ve done cold storage for many years in Southern California and the Bay Area,” Kraft said.

The company now has a dozen cold storage properties. Cold storage warehousing involves storing perishable goods such as food, medicine, and artwork at a specific temperature to maintain their integrity and quality.

Cold storage is highly desirable as there is not much of it.

“There’s a big void,” said Andrew Brenner, Newmark’s general manager. “Cold storage is incredibly underserved and it’s very difficult to find the right land with the lower zoning to build those facilities.

Specializing in areas such as cold storage is part of Dedeux’s strategy.

“We tried to get away from being a commodity warehouse player,” Kraft said, “so we found terminals, trailer yards, high-speed logistics buildings and cold storage in these spaces to define what’s different. We find those opportunities to do better in our capital cities than in the capital cities of our partners.

Part of those opportunities include selling warehouses. Dedeaux Properties unloaded properties worth $122 million last year.

“We’re looking to sell properties by chance,” Kraft said. “Between ourselves and our partners involved in our deals, we need to strike a balance between the kind of return we’re trying to achieve. We will selectively sell those assets when returns are strong.

Continued expansion.

In addition to Kern County, Dedeaux is looking to expand beyond Southern California with plans to expand its industrial enterprise to the Bay Area and other parts of California.

“Our goal is to expand widely, including mostly southern California,” Kraft said. “We have a site in San Juan Capistrano and we’ve been looking at some sites in the San Diego area.”

The market cycle will determine how much further development Dedeaux continues in the pipeline.

Currently, the industrial market in Los Angeles County is incredibly tight, with a vacancy rate of 1.4% during the fourth quarter, according to Jones Lang LaSalle Inc. data. While the vacancy rate increased slightly last year, Mike Tingus of Lee & Associates LA North-Ventura noted that the industrial property segment is still healthy in the single digits.

“The markets remain relatively strong,” Kraft said. “It’s fair to say it’s top notch. But it’s always difficult to use the fourth quarter as a barometer because you get the holidays on the road. We continue to see interest in our buildings. But it will take at least the last two quarters to get things done as people may be a bit scared because of the economic headwinds like the war in Ukraine, interest rate hikes, etc.

Overall, Kraft said the market remains strong, even though some things are slowing down.

“We continue to see a lot of interest,” Kraft said. “A lot of people in the logistics space still want a lot of space. Although we are not at peak activity levels, there is some stability in the marketplace that we think will ultimately be favorable for the market.

While a recession threatens the economy in the new year, other key indicators remain positive, Kraft said.

“Consumer sales were strong during the holiday season and will continue to be strong through 2023,” Kraft said. “We see a shift from large durable goods to smaller goods and other non-durable goods to continue to meet industry demand.”