[IMGCAP(1)]

ORANGE COUNTY, CA-The East Anaheim corridor of North County—which consists of Anaheim, Santa Ana, Placentia/Yorba Linda and part of Fullerton—has seen the most 12-month industrial rent growth in Orange County, according to a report from Jones Lang LaSalle. With approximately 120 million square feet of space, the area has historically been the largest industrial base in the county, which makes rent growth there so healthy, Louis Tomaselli, senior managing director of JLL, tells GlobeSt.com.

“The East Anaheim corridor is where most of the industrial has been built over the years,” Tomaselli says. “As we develop or redevelop, it's been in that marketplace which is one of the reasons we see a lot of activity in that market.”

According to Jones Lang LaSalle's heat map for industrial rent growth in Orange County (shown below), this corridor is in red, meaning it has seen excellent positive rent growth of 3% or greater over the past 12 months. “The reason it is red is because it has seen a tremendous amount of absorption,” Tomaselli explains. “There is very little new vacancy and about 1.5 million square feet of new development in Anaheim, mostly on the Boeing campus. It's state-of-the-art, class-A space, so there's tremendous demand from new tenants to be there. There's very little product, and new product commands the highest rents—that's why the market is moving to higher growth there.”

[IMGCAP(2)]

For an enlarged view of the map, click here.

Santa Ana, which is also red, is “a very desirable marketplace from an industrial perspective,” Tomaselli adds. Santa Ana and Anaheim have an economic enterprise zone, which means tenants get employee- and investment-tax credits for locating there, which other areas can't deliver. “You can do better if you're moving a lot of employees because of these credits.”

Tomaselli also said that Santa Ana had some deterioration in rents due to the economic downturn, but is recovering faster as rents are catching up to the rest of Orange County. Anaheim can push rents higher because they were lower to start with; meanwhile, Tustin and Irvine are expensive markets without much industrial space. “We're seeing a 10% to 15% premium in Irvine, especially in the Spectrum area, over North County.”

The areas in pinkish red on the heat map are “a good sign,” says Tomaselli. They mean positive rent growth, but because many of those markets are much smaller than the East Anaheim corridor, there's not as much tenant activity, so rents aren't swinging up or down as much.

While part of a strong industrial base, much of the blue areas—which include Huntington Beach, Cypress, Garden Grove and West Orange County—have seen a considerable exodus from that market recently. Cypress, which had an unusually large headquarters market, saw JVC, Sharp, Fuji Film and other large groups leave due to consolidation. “Cypress traditionally had a higher lease rate than Anaheim and has taken a hit on rates because they just had so much vacancy at one time,” says Tomaselli. He adds that he expects to see much of this vacant space being absorbed by the end of the third quarter.