YORBA LINDA — A local joint venture is betting big on going small.
Seal Beach-based Harbor Associates and San Francisco-based Farallon Capital Management acquired the Yorba Linda Commerce Center, a 280,000-square-foot industrial campus, for $81 million in an off-market deal, the companies announced.
The 16.5-acre Yorba Linda Commerce Center at 3700–3960 Prospect Ave. in Yorba Linda comprises 10 buildings with 83 suites ranging from 1,200 square feet to 24,000 square feet.
Built in 1987, the small-bay industrial park was 98% leased at the time of sale, JV officials said.
“It’s very difficult to find a small bay multi-tenant property of this quality and scale in a high demographic submarket like Yorba Linda, where vacancy is virtually zero percent,” Justin Loiacono, principal at Harbor Associates, told the Business Journal.
Gary Martinez of Ashwill Associates represented the seller, a private family from San Clemente that owned the property for more than 30 years. The Cashman family initially bought the industrial campus for $8.5 million in 1993, according to CoStar records.
CBRE’s Shaun Moothart, Bob Ybarra and Andrew Post arranged a $56.3 million loan for the acquisition through an affiliate of QuadReal Property Group.
Founded in 2015 with backing by private equity firm, The Bascom Group, Harbor Associates is a Seal Beach commercial real estate company that specializes in acquiring, renovating, operating and selling commercial properties.
In the past five years, the company has acquired more than $548 million in commercial properties, according to CoStar records. Farallon Capital is a known institutional global investment manager with $2.1 billion in real estate acquisitions since 2021.
Betting Big on Small Businesses
The sale comes at a time when investors are putting more money into small or shallow-bay industrial real estate, as available space in Orange County becomes scarce and the overall industrial market slows.
According to CBRE, shallow-bay industrial properties are usually buildings smaller than 50,000 square feet, with clear heights between 14 and 28 feet. They are mainly used by smaller local businesses and mom-and-pop shops.
A CBRE report in March found that large logistics warehouses have led industrial development in recent years. At the same time, smaller multi-tenant industrial projects have become harder to find due to higher land prices, redevelopment and construction costs that often favor larger facilities or housing projects.
Meanwhile, demand from contractors, distributors, service businesses and light manufacturers has remained strong, especially in Orange County’s affluent areas.
CBRE named Orange County and Charlotte, North Carolina as the most supply-limited shallow-bay industrial markets in the country. These areas have low vacancy rates and are among the highest rents in major U.S. industrial markets.
The small-bay industrial properties remain the strongest part of the Orange County industrial market. According to CBRE, vacancy rates are about 2% for spaces under 24,000 square feet and close to 1% for spaces under 10,000 square feet.
In comparison, the overall industrial market in Orange County has a 5.7% vacancy rate, according to CBRE.
“Small bay industrial in Orange County is incredibly tight and is arguably the healthiest shallow bay market in the entire country,” said Rich McEvoy, principal at Harbor Associates.
Loiacono explained that even with strong demand, current development costs make it hard to build new small-bay properties in Southern California. Many existing small-bay sites have been torn down for larger industrial projects or turned into housing.
“Given the high land prices in Southern California, developers are forced into building sites that maximize the square footage, which means bigger box logistics facilities,” he said.
“There’s a bit of a mismatch in terms of where the tenant demand is and the product type that’s being delivered.”
Harbor’s Future Plans
Harbor plans to keep the Yorba Linda property in the long term and make improvements, such as catching up on maintenance and boosting its visibility and marketing.
Loiacono also credited the previous owners for taking care of the property over the years.
“The seller did a great job maintaining this asset in a Class A manner,” he said.
He said that many tenants are local business owners who live in the area and want to keep their operations close to home.
“Many of the tenants at this property live in the nice residential neighborhoods nearby and want their businesses to be located in a Class A facility near their homes,” Loiacono said.
