IRVINE, CA—The Orange County industrial market is so tight that the bulk of what is available tends to be poorly located or functionally obsolete, Cushman & Wakefield executive managing director Rick Ellison tells GlobeSt.com. what becomes of this space when vacancy is so minute. According to a recent report from the firm, there remains tremendous demand from occupiers for industrial space in Orange County, but there is insufficient supply to meet tenant demand. The extremely tight market is inhibiting companies from growing and expanding and putting a lid on leasing activity.

We spoke with Ellison about the available industrial space in this market and what is expected to become of it.

GlobeSt.com: What is expected to happen with poorly located or functionally obsolete industrial space in Orange County?

Ellison: With the market this tight, everything leases; the difference is the better product in the best locations leases fastest and at the highest rates. The less desirable product leases at a discount to the more desirable product. The longer lease-up time is usually a result of one or two factors: first, some landlords don't immediately recognize their properties' limitations and target too high of a rent; second, tenants are drawn to more functional product of the Inland Empire if they cannot get exactly what they want in the infill markets. The less-desirable product will lease at a discount. The least functional product will be redeveloped.

GlobeSt.com: Will the poorly located space be adapted to other uses?

Ellison: There are few poor industrial locations in Orange County. Less-desirable locations are areas furthest from the nearest freeway or on the northeast outskirts of the county. The only alternative product type that currently competes with industrial values is residential. These outlying areas of Orange County also tend to be more suburban, where there is less demand for high-density residential developments. As a result, the “poorly located” industrial sites will likely continue to be industrial and will lease at a discount to more favorable locations.

GlobeSt.com: Can we expect more renovation of non-functional space, especially in such a tight market?

Ellison: We will continue to see conversion of less-functional industrial product to new industrial development. In fact, nearly all new construction in the infill markets is redevelopment since most of the raw land has long since been developed. The trigger point to redevelopment is when the value of new development exceeds the value of the current product. Properties ideal for conversion are older manufacturing buildings or under-improved properties, meaning there is a lower building-to-land ratio than modern standards. We also continue to see conversion of industrial inventory in favor of high-density residential developments in the more urban locations of Orange County, primarily Irvine and Anaheim.

We spoke with Ellison about the available industrial space in this market and what is expected to become of it.

GlobeSt.com: What is expected to happen with poorly located or functionally obsolete industrial space in Orange County?

GlobeSt.com: Will the poorly located space be adapted to other uses?

GlobeSt.com: Can we expect more renovation of non-functional space, especially in such a tight market?

Instant Insights /

The Fate of OC's Less-Desirable Industrial Space

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