Rent Growth Impacts Land Values
The leasing of 2650 E. Merrill Avenue in Ontario, CA, a 71,266 SF, Class “A” industrial building at 0.90 PSF NNN is an indicator land values will continue their climb. It was not long ago where you would expect this rate to be in the $0.65 PSF NNN range. A 4.75% cap rate when applied to $0.90 PSF NNN equates to a building value of $227 PSF. If we assume $100 PSF for construction and a 50% site coverage this leaves $63.50 PSF for the developer’s fee and land purchase. Land values have been hovering around $55 PSF in the 1st Quarter of 2021.