Why OC Industrial’s Lease Terms Are Lengthening

Foss: “Just as sales prices and average rents are at record highs and more and more tenants are signing early renewals in order to secure their space, average lease terms have also extended.”

IRVINE, CA—Industrial tenants in Orange County are trying to hedge against rising rents and lower vacancy by signing longer-term leases, plus landlords are requiring longer terms in order to stabilize an asset or secure debt, JLL EVP Byron Foss tells GlobeSt.com. According to a recent report from the firm, over the past five years, average lease terms have experienced a 19 % increase, going from an average of 50.7 months in 2012 to 60.5 months in 2017.

The report also revealed that the 2017 average sales price per square foot of $161 has increased by 20% in the past ten years in this market and has surpassed the 2008 market peak of $144. The recent sale of the 181,000-square-foot building at 4150 North Palm St. in Fullerton for $32.6 million ($180 per square foot) demonstrates that owner-occupiers are well-capitalized to purchase properties at prices high enough to compete with investors.