A New User Enters the Already Tight Industrial Market
Private users are now competing for industrial spaces to use for storage space or alternative uses, like music venues.
Thought the industrial market couldn’t get tighter? Now private-use buyers are showing an increased demand for industrial space in Orange County. These buyers are also willing to pay big for the space. Daum Commercial’s Orange County office recently sold two class-C industrial properties to private users for $379 per square foot—double the average price per square foot in Orange County. Private uses include storage and alternative uses like restaurants, music venues, do parks and automobile storage.
“The main driver for many years has been the close proximity to Newport Beach housing and affluent owners want their personal hobby and storage nearby,” Mike Barreiro, EVP at Daum Commercial who represented the seller in both sales, tells GlobeSt.com. “Since Newport Beach has only two or three industrial-zoned streets inside their municipal lines, the closest alternative is Costa Mesa. Personal use is storage of antique and high-end automobiles, a small car club subculture is emerging here.”
This is a growing trend, and it has pushed more traditional industrial users to look for space in adjacent markets. “Standard industrial users can find lower-cost alternatives in adjacent submarkets,” says Barreiro. “I closely monitor the market and I see very few traditional manufacturing and distribution companies acquiring in Westside Costa Mesa. In addition to personal use buyers, we are seeing non-conforming users acquiring industrial and re-purposing older, functionally obsolete industrial properties.”
Industrial properties in Newport Beach have been the most popular, as well as any property with a secured yard. While demand from private-use buyers is growing, it certainly isn’t new. “I feel this trend is commensurate to the broader economy, I also saw this trend before the last downturn,” adds Barreiro. “People are feeling good about their personal net worth and real estate market and, as such, are buying buildings despite the low yields.”
The Orange County market has an extremely limited supply with a mid-2% vacancy rate that drops below 1% in certain submarkets. Barreiro’s advice to private-use buyers looking for properties is to track the market and be ready to bid. “My advice to users is carpe diem, if they see a property that works I advise them to place a competitive offer out the shoot,” he explains. “For many users it’s a learning process, you have to lose a few before you realize how swiftly the market is moving.”