Marchiorlatti: u201cThe product size we build is still in recovery mode in the Inland Empire.u201d

ALISO VIEJO, CA—A pent-up demand for mid-sized industrial properties is spurring Shea Properties to build in Southern California. The firm is focusing particularly on Orange County, San Diego and Los Angeles, Jon Marchiorlatti, VP, industrial development and acquisitions for Shea Properties, tells GlobeSt.com.

As GlobeSt.com reported last week, Shea is developing a new industrial property in Huntington Beach and is expanding an existing project in Ontario, CA. The projects, which began construction last month, will add a total of approximately 270,000 square feet to the firm’s portfolio and will be available for occupancy later this year.

Marchiorlatti says the Ontario expansion is actually new construction, since new storm-drain channels were able to free up land adjacent to an existing building. “We’re beefing up our industrial division. That’s one of the reasons for that expansion, and that’s what I came on board to do.”

The firm also has a property in escrow in Carlsbad, CA, on which it is planning to build a ground-up project of two 57,000-square-foot industrial buildings after escrow closes in May. Completion for this project is slated for second-quarter 2015.

“I have offers out on two or three other properties, but not so much in the Inland Empire right now because the product size we build—between 50,000 square feet and 200,000 square feet—is still in recovery mode there,” says Marchiorlatti. “The smaller buildings in that market are still recovering, so we’re not as aggressive in that market as we are in Orange County, San Diego and L.A.”

He adds that the pent-up demand in those markets is because “nobody has built anything in any one of these markets in the last seven to 10 years, and it’s difficult to find infill sites to build this product type. I also believe we’re filling a niche because this product type was historically built by smaller developers who no longer exist due to the financial crisis. Lenders won’t lend to the smaller developers, but because of our track record and financial strength, we are able to do products like this. Also, our projects are for long-term hold and long-term income—we don’t sell them immediately.”