McAllister: u201cDeals aren't easy any more. They are long and drawn out.u201d

ORANGE, CA—Industrial space varies in different parts of Orange County, and savvy industrial tenants know what’s available in each submarket. spoke with Tom McAllister, an industrial specialist with CBRE, to explore the different types of space and what’s behind the spate of industrial leases he facilitated recently in Orange County. What are industrial tenants looking for in Orange County properties?

McAllister: There are differences in the different areas of the county. South Orange County has a higher number of improved buildings, more office space, lab or R&D space than you would see in North Orange County, where warehouse and distribution space is more common. East County has more pure manufacturing buildings with low clear heights and lots of floor space. Are there any commonalities among these tenants and their businesses?

McAllister: Each of these tenants fits the submarket for that area. For example, the AVL Powertrain deal was a 26,000-square-foot building with 18,000 square feet of two-story offices in South Orange County, the Expo 3 deal was manufacturing space in Garden Grove in East County, and the Shaxon deal was a warehouse/distribution space in Northeast Anaheim in North County, which is perfect for that market. What has led to the sudden spate of industrial leases signed in the county?

McAllister: Deals aren’t easy anymore. They are long and drawn out. This represents the culmination of deals that just happened to close in the same month. We got them all done and all closed at the same time. In a tight market, it can take a long time to find space that meets each tenant’s specific needs. What else are you noticing about industrial leasing in this region?

McAllister: We’re still seeing a lot of blend-and-extend type deals because tenants realize the market is such that rental rates are going up and there’s not much inventory. Landlords and tenants are willing to extend for longer terms now for the purpose of negotiating at today’s lease rates rather than when the rents are anticipated to be higher. This benefits the tenants because they get today’s rent, and if rents continue to rise, they made the right decision. From a landlord’s perspective, it reduces their risk of any vacancy—they’d rather lease it for slightly less today with a good tenant than take the chance of getting higher rent but having to paint, carpet or remodel and pay a higher commission to the broker for a new tenant.