The Answer Depends on Your Unique Circumstances
There are thousands of Orange County business owners who purchased their industrial buildings when prices were only a fraction of today’s values. If you’re one of them, congratulations, your foresight paid off.
Many owners have seen their industrial real estate values appreciate far beyond original expectations, creating life-changing equity gains.
How Industrial Property Values Reached Today’s Levels
If you bought a 10,000-square-foot industrial building in Anaheim in the early 1990s for around $60 per square foot, the idea that it could be worth $400 per square foot in 2025 would have sounded unrealistic.
Yet that scenario is now reality. Even buildings purchased as recently as 2011 are worth nearly four times their original price, depending on condition, configuration, and location.
For simplicity, we’ll use $400 per square foot to illustrate how dramatic this appreciation has been.
A Real-World Example: The Power of Long-Term Ownership
Consider a 10,000-square-foot building purchased in Anaheim in 1995 for $600,000. With a 15% down payment and a loan paid off over time using internal rent, the owner sells the property in 2025 for $4,000,000.
After depreciation, capital improvements, closing costs, and taxes, the owner walks away with approximately $2.69 million in after-tax proceeds, nearly 30 times the original down payment.
Returns of this magnitude were unimaginable at the time of purchase, yet they are increasingly common across Orange County today.
Why Today’s Market Feels Different
Industrial property values surged largely due to historically low interest rates fueled by loose monetary policy. When inflation surged, the Federal Reserve raised rates aggressively, pushing mortgage rates higher and cooling buyer demand.
Values peaked in late 2022. Since then, pricing has softened, but a full-scale correction has largely been avoided — so far.
This creates uncertainty for owners of highly appreciated industrial real estate assets.
The Core Question: Sell Now or Hold On?
Owners now face a difficult decision:
- Sell, realize substantial gains, and reduce exposure to a potential correction
- Hold, hoping interest rates decline and values rebound
For long-term holders or those planning to pass assets to heirs using a step-up in basis, holding may make sense. However, for owners relying on property equity to fund retirement, today’s conditions strongly favor reducing risk.
History is worth remembering. In prior downturns, industrial property values declined by 40% or more in some submarkets. A 40% drop turns a $400-per-square-foot building into a $240 asset almost overnight.
Why Many Owners Hesitate to Sell
Despite strong reasons to consider selling, many owners remain on the sidelines. Two concerns come up repeatedly:
1. Capital Gains and Tax Exposure
Writing seven-figure checks to the IRS and the California Franchise Tax Board is understandably painful. However, watching equity erode during a correction — while still owing taxes — can be even worse.
Even after a modest correction, owners may face both lost equity and a significant tax bill, compounding the financial impact.
2. Not Knowing Where to Reinvest
Many owners worry about what comes next after selling. Fortunately, today’s environment offers alternatives that don’t involve the ongoing risk and management burden of real estate ownership.
Even short-term U.S. Treasury bills are currently yielding competitive returns while remaining liquid and low risk. Depending on your financial goals and risk tolerance, there may be more attractive options than you expect.
Final Thoughts: Timing, Risk, and Personal Strategy
These are unusual times, and there’s no one-size-fits-all answer. The right decision depends on your timeline, tax position, risk tolerance, and long-term goals.
If your industrial property plays a critical role in your retirement strategy, it may be worth acting sooner rather than risking a meaningful correction. We’ll explore reinvestment strategies and alternatives in an upcoming post, stay tuned.
Thinking About Selling Your Industrial Property? Let’s Talk.
If you own a highly appreciated industrial building and are unsure whether now is the right time to sell, a short conversation can help bring clarity. Every situation is different, and timing matters more than ever in today’s market.
A strategic discussion now could help you protect years of hard-earned equity.
👉 Schedule a confidential consultation with the Zehner Hill team