Newport Beach-based The O’Donnell Group is completing construction on a 192,000-square-foot building in Anaheim’s industrial sector. Developed on a speculative basis, the big box might feel a certain kinship with the dinosaurs that watched that big meteor shoot across the sky a few million years back.
The O’Donnell development, called Anaheim Gateway, comes as the economy slides into an abyss. And observers say it appears to be the last of its kind in Orange County for awhile.
“At this point, it’s the last large distribution building being completed in North County,” said Rob Socci, vice president with Voit Commercial Brokerage, Anaheim Metro Office. “There are others listed as being planned, but they are waiting for something miraculous to happen.”
O’Donnell paid around $3 million last year when it bought eight acres from German chemical maker BASF AG. Construction costs for the project were not disclosed. The infill site, near the Riverside (91) Freeway, had sat undeveloped. Nearby is a 1.2 million-square-foot industrial facility.
The O’Donnell Group plans to subdivide the warehouse on Lemon Street. Large-scale distribution companies are in talks for the site, according to Socci.
“The site does not preclude manufacturers, but the project was designed for distribution,” Socci said.
Large-scale users need more than the 24-foot truck clearance found in older industrial buildings. The O’Donnell building has 30-foot clearance, ideal for large distributors, according to Socci.
The O’Donnell Group intends to manage one to three tenants and own the building.
“They’re pretty close to cutting one deal,” Socci said.
A lack of developable land and high rents in OC have pushed most industrial tenants to the Inland Empire, analysts say.
There, big boxes just keep getting bigger. Bastien and Associates, a Tustin-based architectural firm, has designed “mega” boxes outside of OC.
In May, Newport Beach-based Western Realco started construction on the Bastien-designed Airport Mission Business Park, an 875,000-square-foot distribution center in Ontario.
But don’t expect to find Bastien designing boxes of that magnitude in OC, or even boxes one-tenth that size. There just isn’t the market for it.
In OC, land is scarce or too expensive to support industrial construction. That’s why there’s more of a push for user deals and smaller deals.
“I don’t think you’ll see much more of those large projects off the ground the near future,” said Jerry Holdner, vice president of market research with Voit Commercial Brokerage, Anaheim Metro Office. “I think, if anything, you’ll see more user deals, where the user will buy land at a premium and then bring in a developer to build the project.”
Users are willing to pay a premium for the land, according to Holdner.
“Users will step up and pay more than a developer because they really want the ‘land,'” Holdner said. “But a developer can’t afford to do that.”
Earlier this year, there was a rush on industrial land, but time will tell if construction will take place. Among this year’s industrial deals:
++Tulsa, Okla.-based Matrix Service Co. paid $4 million for a 5.6-acre parcel in Orange, with plans for an 80,000-square-foot facility
++Guthrie Development Co. began construction on Lakeview Business Park, a 165,000-square-foot, six-building industrial park in Anaheim
++An unnamed local distribution company has plans for a 281,500-square-foot warehouse building in Anaheim on the former Medtronic Inc. site
n++Overton Moore Properties has plans for a 1.4 million-square-foot distribution center in Buena Park on former Albertson’s Inc. land
While things aren’t what they were, Holdner added that anything 50,000 square feet or more is getting a warmer response these days.
“They lost demand in the late summer, but in the last month, there has been demand for the bigger space,” Holdner said. “There’s been a certain amount of uncertainty in the economy and then the Sept. 11 thing happened. It slowed things for a while, but now people are looking at the opportunities out there.”
The 50,000-square-foot market is pretty slow for leases, according to Tom Dorman, a broker with the Anaheim office of CB Richard Ellis.
“If it’s available for sale, the market is much, much stronger,” Dorman said. “Right now, people want to own and control. They see the value and want to capitalize on that.”
Although Dorman recently had a buyer get cold feet and pull out of a 5.1-acre industrial deal in Brea, the broker has seen gains in a particular segment of the market,the so-called “little” boxes.
“The small-building market is very active,” said Dorman, who is representing one tenant who has decided to purchase a 14,000-square-foot building in Anaheim because it’s cheaper than leasing. n
