The industrial market inSouthern California is suffering from a severe and well-documentedsupply shortage in the face increasing demand. In Orange County,however, the supply-demand balance in the small-box segment of themarket is healthier, with a higher 3% vacancy rate and moreopportunities for developers to bring new supply to the market.Still, this segment has also seen strong demand from users andincreasing rents as a result.

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"There continues to be high demand for industrial buildingbetween 50,000-100,000 square feet in Orange County, vacancy ratesposting consistently in the 3% range and asking rental rates in thecounty increasing 8 percent over the past year," ChrisMigliori, EVP and principal at DAUM CommercialReal Estate Services, tells GlobeSt.com. "That said, muchof the existing inventory consists of smaller buildings under30,000 square feet, and developers who have been fortunate enoughto secure land would prefer to develop and deliver single tenantbuildings in the 200,000 square-foot-plus range.  Thecontributors for such development in that size range is lack ofinventory, cost of construction and the spike in Industrial Landprices in the past 36 months."

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Migliori recently closed two industrial leases in thissize range, a 53,850-square-foot building leased by U-HaulInternational and a 47,813-square-foot building leased by LG HausysAmerica. Both buildings are owned by Panattoni DevelopmentCo. "Recognizing the current Industrial Market conditions,Panattoni elected to develop four buildings ranging from 47,813square feet to 69,882 square feet and selected DAUM as theexclusive listing agents," says Migliori. "The land purchase wasone of the last strawberry fields in North Orange County, thebuildings were constructed on a 10 acre site split between Anaheimand Placentia."

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Panattoni also focused on quality in developing these propertiesto target top tier tenants. The properties are class-A, corporateheadquarters with 30-foot warehouse clear height, ESFR, docks,fenced yards and state of the art design. "The marketing campaignattracted four nationally recognized credit tenants in the coreNorth Orange Industrial Market," says Migliori. As a result, theleases were signed and completed before delivery of theproperties.

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This year, Migliori expects industrial market activity tocontinue to be strong in Orange County, particularly in this marketsegment. "The overall Industrial Market in Orange County continuesto show more horse power," he says. "Even with 1 million squarefeet of industrial deliveries expected in 2020, we expectabsorption will remain high and rents will continue to rise."

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.