COMMERCIAL
Orange County’s industrial market is seeing its worst performance in at least five years.
But entrepreneurial companies and bankruptcy-driven sales are still pushing through some big deals.
Vacancy rates here ended the second quarter at 5.6%, according to the Irvine office of Colliers International. While well below the roughly 19% vacancy rate being seen in OC’s battered office market, it’s still a five-year high for the area’s industrial market.
Factoring in space available for lease that may not yet be vacant, OC’s industrial market has an availability rate of 11.2%. The county has seen about 2.3 million square feet of empty industrial space returned to the market so far this year.
Most of the space givebacks have been the small and midsize building users so far, although there’ve been a few big names putting space back on the market too, according to Colliers data.
Large givebacks of late reportedly include about 250,000 square feet of space by Orange-based wine and spirits distributor Young’s Market Co.
On the bright side, there’ve been some noteworthy deals recently, which is giving the local market some signs of hope, said Clyde Stauff, Colliers senior vice president, who was part of two of the largest industrial deals made so far this year.
He worked on the May sale of Anaheim land previously used by Delphi Automotive Systems LLC to Hartford, Conn.-based Cornerstone Real Estate Advisors and Irvine developer Birtcher Development and Investment Co.
The new owners are building a headquarters and warehouse for Anaheim-based Northgate Gonzalez Markets, OC’s largest Hispanic grocer.
The 15-year Northgate Gonzalez lease is for 374,000 square feet and is valued at close to $69 million,by far the largest lease in terms of dollars seen in OC in more than a year. The building’s development has been put on the fast track by city officials, and the project is expected to break ground around October.
Also in May, Stauff worked on an expansion for Arden Engineering Inc., an Orange-based aerospace parts maker, in Anaheim’s Platinum Triangle.
Arden, which makes components for commercial and military aircrafts, struck a lease for 100,000 square feet of manufacturing and warehouse space.
In the case of the Delphi Automotive, and the just-completed sale of Smurfit-Stone Container Corp.’s Fullerton campus (see story, page 3), the local property sales were completed through bankruptcy court proceedings.
In the near-term, expect to see more of these types of deals, and not necessarily foreclosure-driven sales of local industrial buildings, Stauff said.
“Corporate bankruptcies will drive a lot of land sales, especially as big tenants go broke,” he said.
Property buyers, and the companies making the leases, are more likely to be entrepreneurial businesses such as Northgate Gonzalez, rather than institutional clients, he said.
Parker Lease
Aliso Viejo-based Parker Properties said it has signed what is believed to be the largest new office lease this year in Los Angeles County, at its Summit Oaks project in Santa Clarita.
Medical device company Advanced Bionics LLC will be leasing the five-story Summit Oaks building, totaling 146,385 square feet. It’s a 10-year lease. Terms of the deal weren’t disclosed.
Advanced Bionics, which makes ear implants, is consolidating operations from two locations into the building, including one nearby office. It plans to start moving in to the building, part of the master-planned community of Valencia, later this quarter.
Parker Properties and its codeveloper on the project, Australia’s Dexus Property Group, said they’ll be adding a 10,000-square-foot clean lab and data center to the office. The building was completed about a year ago.
RESIDENTIAL
The apartment-focused real estate investment trust headed up by Santa Ana-based Grubb & Ellis Co. has gotten regulatory approval to try to sell up to another $1 billion in stock.
Grubb & Ellis Apartment REIT Inc. said in late July it got the Securities and Exchange Commission’s OK for a billion-dollar follow-up offering to its initial public offering, which also aimed to raise as much as $1 billion.
Grubb’s initial offering, which began in July 2006, hasn’t raised the maximum amount thus far,the non-traded REIT has raised about $157 million, according to SEC filings.
At the end of the first quarter, the REIT owned about 3,500 apartments spread among 13 complexes in Georgia, North Carolina, Tennessee, Texas and Virginia. Those deals were for a combined purchase price of $340.5 million. The company hasn’t made an acquisition since last September.
