Industrial landlords in Orange County are finally starting to see some of the same action as their office counterparts.
The average asking rent for industrial space in OC hit 87 cents per square foot in the second quarter, a 12% increase from a year earlier, according to Grubb & Ellis Co. The second-quarter rates are up a penny from the first quarter.
“We’ve been talking about it for years, but rents are finally starting to move now,” said Kurt Strasmann, managing director for the OC operations of Grubb & Ellis.
“At a minimum,” expect to see annual rent increases of at least 8%, Strasmann said.
A lack of available space is behind the higher rents. Vacancy rates hit 4% countywide last quarter, down 7.5% from the first quarter and about 13% from a year ago.
About 1.3 million square feet of industrial space is being built, with about two-thirds of that being built in the western part of the county. Tenants absorbed about 1.25 million square feet of industrial space in the second quarter.
About 640,000 square feet of that absorption was related to manufacturing and distribution space.
The industrial market is about 270 million square feet in all, about three times the size of the area’s office market.
Continued low vacancy rates finally are giving landlords the upper hand, allowing them to stay firm on rents and concessions, Strasmann said.
North County remained the tightest market with a 3.1% vacancy rate. Rents there are the lowest, at 69 cents per square foot.
South County is the most expensive at $1.11 per square foot and had the highest vacancy rate at 5.1%.
Research and development space, which makes up about 30% of the industrial market, brings in the highest average rent at 96 cents a square foot. R & D; vacancy came in at 4% for the second quarter, down 60 basis points from the prior quarter, according to Grubb & Ellis.
Only 32,000 square feet of R & D; space for lease was being built in the north and south parts of the county in the second quarter. Most developers are focusing on R & D; buildings for sale at 7,000 square feet or smaller. Such space goes for about $280 per square foot.
Sales of industrial buildings to business owners slowed slightly in the past quarter, as has the sales of some lower-quality office space, Strasmann said. That’s largely due to rising interest rates.
“There’s a mild undercurrent, the market is not as frenzied,” he said.
Money Mailer Inc. had the largest lease for the quarter, with a 192,609-square-foot deal in Garden Grove. Britain’s Meggitt Defense System had the second largest deal, a 152,849-square-foot lease in Irvine.
Vista Pointe, a 286-unit apartment complex in Anaheim, sold for $46 million.
The buyer: Kennedy Wilson Multifamily Management Group, part of Beverly Hills-based real estate investor Kennedy Wilson Inc.
Other investors include Los Angeles-based MC Realty Inc. and Japan’s Kenedix Inc. Wachovia Corp. provided the financing.
The buyers plan to spend $3.5 million on renovations, including adding fences to create private patios and backyards, and garages. The complex is 94% leased. Vista Pointe includes 174 one-bedroom apartments and 112 two-bedroom units.
Essex Property Trust Inc. of Palo Alto was the seller. Stewart Weston of Marcus & Millichap Real Estate Investment Brokerage Co.’s Long Beach office represented both parties.
Democracy Inaction
Rant alert.
I went to my first Irvine City Council hearing earlier this month, in the hopes of learning more about the city’s plan to add more homes to the Irvine Business Complex.
Instead, I got a pretty good understanding of how much the City Council respects the time of its constituents.
By my count, roughly 40% of the attendees at the crowded meeting were there for the IBC issue, many of them local business owners and developers.
Remarkably, those interested in the IBC issue were kept waiting by the council for more than five hours.
The hearing kicked off at 4 p.m. I left at 8 p.m., with no promise of the IBC matters being addressed. I later found out they began about 90 minutes later, and ran until 1 a.m., when the meeting was halted.
That wasn’t even the most egregious snub of the evening.
Another 40% of the attendees were there specifically to hear about the city’s handling of its recent China-Taiwan sister city debacle.
Amazingly, that issue never even was addressed, despite being high on the docket. So much for smoothing over hurt feelings there.
As far as first impressions go, the hearing certainly left a lot to be desired. The IBC issue is set to be resume this week.
