IRVINE, CA—As prices for large, big-box industrial space rise and manufacturers continue to seek last-mile distribution solutions, light multi-tenant industrial space remains in high demand in the Orange County market, BKM Capital Partners' director of acquisitions Brett Turner tells GlobeSt.com. This type of product makes up nearly half of the industrial market. We spoke with Turner about the increased demand for this product type and how industrial investors are thinking about space in this market.

GlobeSt.com: What factors are causing the rise in demand for multi-tenant light industrial space?

Turner: Our customers are service-sector tenants. They are servicing manufacturers close by, so as we see a growth in manufacturing, the ultimate result in that is that multi-tenant industrial space gets gobbled up by those tenants servicing manufacturing. Domestic manufacturing has been growing steadily since 2010, which has led to the service-sector economy really taking off.

GlobeSt.com: What is driving investors to big-box industrial space? Is e-commerce the main reason?

Turner: In 2015, we had $295 billion in e-commerce retail sales; 2017 is projected to be $354 billion. That's impressive growth, but what's really exciting is the projection of $485 billion in e-commerce sales by 2021. These e-commerce tenants are competing for delivery speed, creating a surge in demand for infill industrial product. Investors are trying to get ahead of this demand.

GlobeSt.com: With more tenants seeking multi-tenant light industrial space, what will happen to rental rates for this type of space?

Turner: We've seen a significant rise in the last two years in rental rates for multi-tenant light industrial space. Our growing tenant base is competing for increasingly limited supply as multi-tenant product is redeveloped into residential. This shrinking of supply is colliding with a growth in demand, giving rents nowhere to go but up.

GlobeSt.com: What is the inventory for multi-tenant light industrial space like in the Orange County market?

Turner: Orange County is really a prime example of that decreased supply. As apartments keep going up, our supply gets demolished. Availability is extremely limited. The vacancy rate in Orange County's multi-tenant light industrial space is 1.5% right now.

Instant Insights /

Why Light Multi-Tenant Industrial Is Attracting OC Tenants

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