One of the largest industrial facilities in Orange County, a 1.2-million-square-foot property in Fullerton long home to paper goods manufacturer Kimberly-Clark Corp., has traded hands for $202 million.
Australia’s Goodman Group, an $18 billion-valued industrial investor with a massive overseas portfolio that operates its North American operations out of Irvine, recently completed the purchase of the facility at 2001 E. Orangethorpe Ave., a sprawling site near the intersection of the Orange (57) and Riverside (91) freeways, and about 2 miles south of California State University-Fullerton.
It’s one of just a handful of industrial deals to top the $200 million mark in Orange County the past five years, according to data from real estate market tracker CoStar Group Inc.
Plant Closure
A sale had been expected for much of 2019; Kimberly-Clark announced plans last year to shutter the tissue-making facility, which employed close to 300 people.
The Irving, Tex.-based maker of Kleenex and other related products (NYSE: KMB) sold the property for about $155 per square foot.
The company disclosed in regulatory filings a month ago that it realized a $182 million pretax gain on the sale of an undisclosed manufacturing facility and associated real estate as part of a restructuring plan; sources say that sale refers to the Fullerton property.
Kimberly-Clark still occupies the facility, but is expected to vacate sometime next year once the existing facility is razed.
CBRE Group Inc.’s Glenn Dyke, Darla Longo and Barbara Emmons represented the seller, while Sean Ward and Ben Seybold from CBRE represented the buyer.
Multibuilding Redevelopment
A redevelopment plan is currently in the works for the property, which will make way for a new, logistics center that aims to capture surging demand for last-mile distribution facilities, according to the new owners.
At 1.5 million square feet spread across three to four buildings, it would be the largest industrial development project to break ground in Orange County in nearly seven years, following the start of construction of the Anaheim Concourse project 3 miles away, a 1.6-million-square-foot project headed by Irvine’s Panattoni Development Corp.
The Fullerton development plan is currently under review by the city, with initial construction expected to start by the end of next year, according to Goodman.
Second OC Site
Anthony Rozic, CEO of Goodman North America, said the project will enable “customers to create a unique logistics campus tailored to their needs with capability to increase their supply chain efficiency.”
“These sites provide our customers with the opportunity to be more efficient and agile and keep up with the changing retail and e-commerce landscape,” Rozic said.
This property’s specific location in OC’s main base of industrial facilities is expected to bring in “premium rents,” bolstered by a lack of new construction within the sector locally, according to Clyde Stauff, senior executive vice president at the Irvine office of Colliers International.
“Most of the stock of buildings in Orange County is over 25 years old, and they’re not designed for pure logistics users like this project will be,” Stauff said.
“It’s a very compelling location, with growing demand for last-mile centers for e-commerce companies.”
Vacancy rates for industrial space in OC runs about 3%, based on area brokerage data. That’s close to an all-time low for the market of nearly 200 million square feet.
The proposed project, called the Goodman Logistics Center Fullerton, is the second in OC for the buyer in about a year.
Goodman’s other area industrial site is in Anaheim, a 143,248-square-foot facility on Magnolia Avenue that it bought a year ago and is planning to rehabilitate. A lease with a prominent e-commerce company is rumored to be in the works for that site.
Multiple Tenants Likely
Buildings at the forthcoming Fullerton logistics center will likely run 170,000 square feet in size and higher.
The site is likely to snag multiple tenants rather than a single user, according to JLL Senior Managing Director Louis Tomaselli.
“In Orange County, the sweet spot for industrial users is between 150,000 and 250,000 square feet,” said Tomaselli, adding that higher rents prevent companies from leasing spaces much larger than that.
This year, “there haven’t been any deals above 1 million square feet for industrial users in Orange County or Los Angeles, while there have been eight in the Inland Empire this year alone.”
The new project will “drive new businesses, new energy, and new companies to Orange County,” Tomaselli said.
$680M this Year
The Fullerton site is just one of four stand-alone industrial buildings in OC larger than 1 million square feet, according to CoStar records.
Each of the four buildings has changed hands since 2017.
The past year has seen sale-leaseback deals of Albertsons’ massive distribution buildings in Brea and Irvine.
They sold for $200 million and $278 million, respectively.
In the other outright sale, a nearly 1.1-million-square-foot facility at 6800 Valley View St. in Buena Park sold in 2017 for $131.3 million, or about $119 per square foot, to Oak Brook, Ill.-based CenterPoint Properties.
The Buena Park site previously served as a distribution center for J.C. Penney; it’s now known as CenterPoint SoCal Logistics Center.
No new tenants have been announced to take the place of J.C. Penney, which has moved distribution facilities to the Inland Empire.
