IRVINE, CA—Industrial developers are able to raise rents here, knowing that occupiers have few alternatives in the Orange County market, JLL senior managing director Louis Tomaselli tells GlobeSt.com. According to a recent report from the firm, there are five factors influencing the industrial sector nationwide: the infrastructure revival, e-commerce and urban logistics continuing a rapid evolution, ports benefiting from both infrastructure updates and e-commerce, higher-than-ever institutional-investor interest and the rise of creative-industrial real estate development. We spoke with Tomaselli about these five factors and how he sees them influencing Orange County industrial real estate in in 2017.

GlobeSt.com: Based on these five factors, how do you see the Orange County industrial sector beginning and ending in 2017?

Tomaselli: 2017 will mirror 2016 with sub-1% vacancy in a 260-million-square-foot market, less than 10 alternatives of 100,000-square-foot spaces in a market that had 60 options in inventory in 2009 and occupier demand outstripping inventory 3 to 1.

GlobeSt.com: How do you see the sector changing over the long term, as in overarching trends? Tomaselli: Southern California is a mega region, or mega-politan area, with more than 22 million people. Roughly 60% of California's population resides in Southern California. The e-comm that is here is servicing here, and that will not change since the dense and more-affluent population base is on the coast of Orange County. Also, Orange County has very broad and diverse business sectors, and so we are not over-weighted by any one industry should a single industry or sector slow down. In addition, we have no land, and most of the redevelopment is taking old industrial out of the base to move up to urban-infill multifamily residential, which again creates more pressure on industrial rates by reducing the vacancy rate even more.

GlobeSt.com: How are developers and users getting creative due to lack of space availability, high construction costs and scarcity of labor?

Tomaselli: Developers are sitting pretty and able to raise rents and know that occupiers have few alternatives. The result is occupiers will pay the market to be in Orange County, and for the product or uses that don't need to be in the OC, they will look outside the market to less-expensive areas of operation, e.g., Phoenix, Las Vegas, et al.

GlobeSt.com: What else should our readers know about this sector as we move into the new year? Tomaselli: Southern California is the largest industrial market in the US, with approximately 2 billion square feet in Los Angeles, Orange County and the Inland Empire. Occupiers don't look at Orange County or Los Angeles or the Inland Empire in a vacuum. They look at the entire Southern California market and will locate operations in all or multiple locations to service all of Southern California. As a comparison, the Dallas (650 million square feet) and Chicago (1.3 billion square feet) industrial markets combined are almost the same size as Southern California's. In Q3 2016, Los Angeles and Orange County remain the tightest markets in the country of all 50 markets JLL tracks, with vacancy at 1%. Rental rates and sale prices across all Southern California industrial markets continue to climb to above market record highs last seen pre-Great Recession 2008.

GlobeSt.com: Based on these five factors, how do you see the Orange County industrial sector beginning and ending in 2017?

GlobeSt.com: How are developers and users getting creative due to lack of space availability, high construction costs and scarcity of labor?

Instant Insights /

OC Industrial Owners are “Sitting Pretty”

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