HUNTINGTON BEACH, CA—Mitsubishi Electric Automotive has inked the second-largest new lease transaction by square footage in West Orange County in the past four years. The firm has signed a 10-year lease with landlord Morgan Stanley in the 167,778-square-foot industrial building at 5800 Skylab Rd. here.
The tenant will occupy the space for its regional headquarters and US West Coast manufacturing and distribution. The high-image distribution facility sits on a 7.6-acre site and has 15,560 square feet of office space. Close to the 405, 22 and 605 freeways, the building features a 24-foot minimum warehouse clearance, 17 dock-high and eight ground-level truck doors, a large fenced-in yard, 4,000 amps, T-5 lighting and 242 parking spaces. Tom Mulholland, deputy general manager for Mitsubishi Electric Automotive America, says his firm is “confident that this new facility will provide us an opportunity to be more efficient and effective in the manufacturing of parts, as well as supply-chain and logistic savings.”
JLL‘s Orange County team members Louis Tomaselli and Mitch Lundquist represented Mitsubishi in the lease transaction, while Morgan Stanley was represented by Steve Young, Rick McGeagh and Bob Goodmanson of CBRE.
“After a two-year, comprehensive market analysis, Mitsubishi Electric Automotive America decided that 5800 Skylab Rd. was the best option because it was in close proximity to its employee base, provided a superior corporate image and both manufacturing and logistical building features,” says Lundquist. “With almost all indicators pointing to continued improving industrial-market conditions, JLL was able to negotiate win-win terms for both Mitsubishi and Morgan Stanley to enjoy a long-term, collaborative relationship.”
Tomaselli adds that the lease transaction represents continued demand for space in Orange County’s industrial “sweet spot,” consisting of properties in the 100,000- to 200,000-square-foot range. Demand to lease or purchase industrial space in this range is becoming the catalyst for the market’s rent and sale-price growth as available options decline with each passing quarter. With several pending “sweet spot” leases carrying over into the first quarter of 2014, it is expected that continued absorption, of what little space is available, will lead to accelerated rent growth by year’s end.”
JLL Research notes that prior to the completion of the Mitsubishi lease, vacancy rates in Huntington Beach and the West Orange County submarket were the highest in the county, but taking into account the new absorption, Q1 should see single-digit vacancy in Huntington Beach and close to pre-recession low vacancies throughout the county.
Young comments that demand for this type of high-quality distribution space in Orange County is very high. “There have been few similar opportunities in the area recently, which is why there was such significant interest in this particular property. Vacancy rates have dropped form 4.6% in the third quarter of 2013 to 3.4% in the fourth quarter. We expect vacancy rates to drop again this quarter, thus the lack of opportunity will lead to further demand throughout 2014.”