With 95 percent occupancy, the Orange County industrial market is shining through the clouds of what is still a semi-lethargic market in many areas. It’s well known that industrial real estate is a solid investment option that is safer than many other investment vehicles. Combine that with Orange County’s reputation as a place that people love to work and live, and it’s no surprise the county’s industrial market is successfully rebounding.
Industrial buyers were not just cautious in 2008 and 2009, they were literally standing on the sidelines waiting for the game to resume. The trough of the market really hit in 2009, which was probably the lowest point anyone could have bought a building, but with values down 35 percent to 40 percent, deals just weren’t being made.
Since mid-2010, however, the Orange County industrial market has seen a significant increase in activity as buyers put themselves back in the game. Sellers have become sellers again, and buyers are more realistic about getting deals done. orporate America recognized the trend early on and began making deals. From there, the competition has heated up on the Orange County industrial playing field, as numerous investors seek to acquire Class A and B industrial product.
A major reason for this activity is that investors and users recognize pricing is at its lowest point. It is most likely where it should be for Orange County industrial buildings. Buyers know owners are really listening to their brokers and pricing assets fairly, and they know now is the time to acquire higher-quality properties for less money.
Many users are taking advantage of this excellent pricing and making substantial deals in the region. In 2011, Voit directed the acquisition of a 292,080-square-foot distribution center in La Palma on behalf of the buyer, Dexus Acquirer LLC, which acquired the property for $18.3 million. In addition, TIAA-CREF, an owner-user, acquired the 300,000-square-foot Anaheim Concourse Distribution Center, a Class B distribution facility, for $30 million.
Another example of users taking advantage of an excellent value on an Orange County property is Amada America. This La Mirada-based company was looking to expand its operations and identified a high-quality, 185,741-square-foot facility in Brea, which it acquired for $16 million.
Examples like these are encouraging, and continue to fuel interest amongst investors and users alike.
While industrial sales are strong in Orange County, we will see more tenants recognize the competitive pricing in today’s market and make more deals as we move forward. We know lease rates will rise with job growth, but Orange County lease rates will most likely increase even more than anyone could expect due to a lack of inventory.
With little land remaining for development and most of the quality product over 100,000 square feet already snapped up by investors and owner/users alike, it will be leasing that will become the next major activity in the market.
— Mitch Zehner, executive vice president, Voit Real Estate Services’ Anaheim, Calif., office