ORANGE COUNTY, CA—While they would like to see more newer buildings with higher clearance, users still clamor for Orange County industrial space, causing it to maintain its extremely low vacancy rate, CBRE's senior managing director Kurt Strasmann tells GlobeSt.com. The entire Southern California region is extremely tight on industrial space, but how does Orange County compare to its neighbors among industrial users? We spoke with Strasmann exclusively on this topic.

GlobeSt.com: How are industrial users viewing Orange County as compared to other Southern California markets?

Strasmann: There are really two different industrial markets: the small-building market and the big-building market. For users looking for large distribution facilities, e-commerce or logistics, Orange County is not the primary market that they're looking for unless the end user is close to Orange County and they have to be there. The Orange County industrial market was originally built for the aerospace industry, and it then transitioned into warehouse. The average building size in Orange County is much smaller than an Inland Empire facility. The big user of 200,000 square feet and above may look at the South Bay to be near the port; there is a larger inventory of distribution facilities there.

But really the primary location for larger distribution facilities is the Inland Empire. Typically, users come to Orange County because they need to serve the needs of their geographical location. It's the most efficient way to service their end party. Plus, there's a lot of executive housing in Orange County, so for a privately owned firm where the C suite lives in Orange County, this market is a logical location for them.

North Orange County, where the primary portion of industrial is located, and then the Airport Area in South County are where traditional manufacturing facilities are located, and the larger facilities are being transitioned more into flex/high-end product and alternative uses. In that area, the supply is decreasing rather than increasing. Orange County has the second lowest vacancy in the nation, behind L.A., and the Inland Empire is third. It's a great location—a little more expensive than some of the surrounding areas, but it's not a major hub for industrial.

GlobeSt.com: How does Orange County rank in terms of its proximity to the ports as compared to the other markets?

Strasmann: The port is a gigantic driver for the industrial strength of our market. Users that rely on the Port of Los Angeles and Long Beach are typically importing or exporting a lot of product. The area right around San Pedro and Carson in the South Bay is highly desirable because of the lower drayage costs. In a perfect world, the South Bay would be the most efficient means in which to operate, but there is a lack of large buildings, similar to Orange County. You don't have as many buildings over 300,000 square feet like in the Inland Empire. Also, the buildings in the South Bay are 20-plus years in age, and they're not as efficient as the new, higher-end product in the Inland Empire. That's why it's so dominant—the Inland Empire has the size of buildings that large users are looking for and the high clear heights to rack more product in those buildings.

All of these markets are super strong, and they all have very compelling reasons to locate there. The Inland Empire is the most glamorous market because of the amount of development and activity going on out there. The Inland Empire in 2015 should have a record year in gross and net absorption. It will surpass the 2007 peak. This shows the strength of the market, which has a broad-based, strong demand.

GlobeSt.com: What in the Orange County industrial realm could stand improvement, according to industrial users?

Strasmann: It could use newer buildings with higher clearance and yards for storage. New buildings are just more efficient all the way around. All the development in Orange County is really in North Orange County, where the most has occurred over the last couple of years. The best example is the Anaheim Concourse, which has been tremendously successful with brand-new buildings that are highly efficient in which users can operate. As the marketplace becomes more competitive, companies need sophisticated buildings to operate in to compete. They need amenities and the ability to palletize higher, to have better trucking access and an office component.

GlobeSt.com: What else should our readers know about Orange County's industrial competitiveness?

Strasmann: All of the Southern California markets are very similar in strength. Another point that's important to make is that when product was diverted to the East Coast ports, the West Coast ports lost a significant amount of volume there. This was both a long- and a short-term trend. Certainly, the East Coast is benefiting as the percentage of container traffic coming to the East Coast slowly increased, but the West Coast volume is ramping back up. Despite the debacle on the labor issue, retailers are returning to Long Beach and L.A. as a dominant entry point.