OC Small Box Industrial Demand Falls
The Orange County industrial market has seen strong demand for large blocks of space, but spaces less that 50,000 square feet have struggled.
Orange County is becoming a bifurcated industrial market. For big boxes that serve ecommerce, last-mile and third party logistics, demand is soaring. However, smaller box spaces, which make up a majority of the market supply, are struggling.
“The market will need to keep a very close eye on are smaller assets, sub 50,000 square feet. This portion of the market makes up 85% of all inventory in Orange County and we saw a 100% increase quarter over quarter in new listings coming to the market sub 50,000 square feet. Owner/users and tenant may see opportunities if this trend continues,” Byron Foss, EVP at JLL, tells GlobeSt.com.
For large box industrial assets, the demand is ubiquitous and consistent throughout the Orange County market. For that reason, every industrial submarket has seen an increase in activity for this segment of the market. “Throughout Orange County, we continue to see significant demand for large blocks of industrial space and land parcels,” says Foss. “The large eCommerce, distribution and 3PL’s being the most active segment of the market. We saw an ecommerce company continue to execute on their growth initiatives, reflective of their recent 19 acre land acquisitions in Santa Ana at the former OC Register site and another large parcel in the Irvine Spectrum formally owner by Rockwell Collins. The Airport Area and North Orange County are the most active submarkets within Orange County.”
New construction properties have also been popular among this user segment, helping to drive rents and drive new construction activity. “We have experienced increased demand for recently built distribution space for ecommerce and last mile. Assets under 50,000 square feet have seen slower demand as industries tied to aerospace and manufacturing experience layoffs and an uncertain future,” says Foss.
While big boxes are currently driving the market due to the dynamics of the pandemic, Foss says that the market has traditionally served smaller businesses, and those companies are being adversely affected by the pandemic. “I strongly feel the strength of the OC industrial market and the national economy is small business,” he says. “The longer our elected officials can’t agree on a plan to get our children safety back to school and open up the economy, the deeper the negative impact will be on small business and segments of commercial real estate market moving forward.”