What’s Next for OC Industrial?

Instead of occupying a 1-million square-foot manufacturing-and-distribution facility in the Inland Empire, many companies are choosing an 800-square-foot building in the Inland Empire and a $75,000-square-foot building in Orange County for last-mile delivery.

COSTA MESA—With near-0% vacancy across the county and no available land leading to very little construction, the market is getting creative about maintaining its ability to deliver to tenants seeking space, RealShare Orange County panelists said here last Thursday. Speakers on the panel “Industrial Market: New Opportunities for Orange County” pointed out that industrial demand is strong here, but the market has a different tenant base than Los Angeles and the Inland Empire.

Moderator Douglas Praw, a partner with Holland & Knight, said the US industrial sector has enjoyed 28 quarters of growth and asked the panelists for their take on the current state of industrial in Orange County. Joseph Finnegan, executive director—real estate investing for Morgan Stanley, said industrial vacancy rates are sub-2% across the county, and cap rates are very low. Mike Severson, EVP and chief acquisitions officer for Bixby Land Co., said there’s no land in Orange County, which has led to very little construction, and Jon Marchiorlatti, VP of industrial development for Shea Properties, said his firm’s properties “feel better than what’s on the market”—the class-B and -C properties. “They see the quality, and we can push the rents.” He added that his firm’s properties in Carlsbad and Orange County have leased up well.