Why OC Industrial Demand Pales

ORANGE COUNTY, CA-Demand growth for industrial space in Orange County continues to lag behind its Southern California neighbors, according to Voit Real Estate Services. The firm reports that Los Angeles and Inland Empire, in particular, are ahead of Orange County in this category for a number of reasons.

First, inventory is “a shadow of that in nearby markets,” according to Voit's report, authored by Jerry Holdner, VP of market research for the firm. Second, “buildings are generally smaller [in Orange County], so in terms of demand totals, Orange County will pale in comparison to its larger neighbors.”

Third, L.A. and the Inland Empire tend to pick up most of the port traffic and impact from demographic trends. Nevertheless, the report indicates, “there should be enough of these left over to ensure at least moderate positive absorption over the forecast—just not much.”

As GlobeSt.com has previously reported, the demand for smaller industrial properties continues in Orange County, and Voit points out that since big-box space is in short supply here, small-bay is a good bet for the county. However, the dearth of big-box space may mean that these larger properties will be in demand here soon.

“Currently there are 52 building in Orange County over 300,000 square feet, which totals almost 25 million square feet, and about half of that resides in the North Orange County market,” Holdner tells GlobeSt.com. He says he is aware of only project planned for 380,000 square feet; the project is in Brea, it hasn't yet broken ground it's unclear when or if it will. 

“It's really hard to find large parcels of land for big-box industrial buildings in Orange County, which has pushed most of that demand out to the Inland Empire, where larger parcels of land are available,” Holdner continues. “But if there were to be any development of big box in Orange County, it would most likely be in North Orange County.”

The report indicates that warehouses of less than 100,000 square feet have recorded 1.2 million square feet of positive net absorption over the last year, while warehouses above 100,000 square feet have seen negative net absorption of 890,000 square feet. “With the exception of buildings below 25,000 square feet, which took a major hit during the recession and only recently started recovering, demand for smaller stock has been fairly resilient here. With L.A. and the Inland Empire taking most of the big tenants, Orange County should remain a small-bay demand market for the foreseeable future.”