Orange County may have dropped from the top spot in an annual ranking of U.S. retail markets, but it’s still a good deal at No. 2, according to Marcus & Millichap Real Estate Investment Brokerage Co.
The brokerage recently released its National Retail Index for 2005, which ranks 41 markets. The accompanying report found that investors still are hot on OC.
OC sports the lowest vacancy in the rankings,it’s expected to decline a fifth of a point this year to 3%.
Job growth was slower than expected in OC last year, but should pick up in the second half of this year, according to Marcus & Millichap. The county is set to add 35,000 jobs this year, an increase of 2.4% versus 2004.
Many of the new positions should be well paid, which would support retail sales growth.
Developers this year are slated to finish construction on 1.1 million square feet of shops, which isn’t much, according to Marcus & Millichap.
Perhaps most important for investors: Landlords should keep hiking rents as vacancy declines. The average asking rent is expected to increase by nearly 5% to $2.28 per square foot per month.
(CB Richard Ellis Inc. is a bit more bullish,its fourth quarter report put the average rate at $2.29 per square foot per month, with North County leading the market at $2.60. It puts the vacancy rate higher at 4.4%.)
Individual investors like strip malls selling from $1 million to $3 million, according to Marcus & Millichap. Buyers of these properties have been aggressive, leading to a 28% increase in the median price to $205 per square foot.
San Diego topped the 2005 index, rising two spots. The area is expected to lead the nation in rent growth and posted the second-lowest vacancy rate, according to Marcus & Millichap.
Washington, D.C., was No. 3, falling one position. The brokerage sees vacancy as flat there.
Two South Florida markets rounded out the top five: Fort Lauderdale finished at No. 4 and West Palm Beach at No. 5. West Palm Beach rose two places based on expected strong employment and household growth forecasts.
The markets at the bottom of the list suffer from poor economic growth and mostly are in the Midwest. Some areas suffer from people leaving.
The bottom three: No. 39 Columbus, Ohio, No. 40 Cincinnati and No. 41 Indianapolis.
|
|
4 Hutton Centre Drive: Triple Net paid $49 million for Santa Ana building |
Another Big Buy
Santa Ana-based Triple Net Properties LLC recently bought another class A building here: 4 Hutton Centre Drive.
The company paid about $49 million, or $233 per square foot, for the 10-story building in Santa Ana, according to CoStar Group Inc.
The building is 76% occupied by 18 companies, including Forth Worth, Texas-based architect and engineer Carter & Burgess Inc., Scotts Valley-based Borland Software Corp., and Richmond, Va.-based LandAmerica Financial Group Inc. The building is on 2.7 acres that include a lake.
Bob Smith of CB Richard Ellis Group Inc. represented the seller, an investment arm of the brokerage. Triple Net represented itself.
Two years ago Triple Net bought the high-profile Xerox Centre in Santa Ana.
The company is one of several syndicators based in OC. Syndicators pool individual investors to buy real estate and then manage the buildings for them.
These investors share ownership in a relationship known as tenant-in-common. They often have just sold another property and avoid paying capital gains taxes by putting their money into another deal, taking advantage of section 1031 of the tax code.
Syndicators are doing bigger and bigger deals. They’re taking advantage of low interest rates, of course. Another factor: Investors like getting out of property management.
Legal Leasing
Three law firms recently leased spaced in Irvine,another good sign for OC’s office market.
Payne & Fears LLP expanded at Jamboree Center; McDermott, Will & Emery renewed at Lakeshore Towers; and Cox, Castle & Nicholson LLP renewed at Newport Gateway.
The three deals total $15.4 million and 79,104 square feet. Kevin Bender of CB Richard Ellis represented all three firms.
Chicago-based McDermott took 35,791 square feet, the biggest of the deals. The company leased part of the fourth floor and all of the fifth at 18191 Von Karman Ave.
The seven-year lease renewal is worth more than $7 million. Lakeshore Towers Limited Partnership was represented by Rick Kaplan and Jeff Osbourne of Cushman & Wakefield Inc.
Payne & Fears LLP is taking 28,883 square feet, an expansion of about 6,000 square feet at 4 Park Plaza. The company is headquartered in the building, which is owned by Newport Beach-based The Irvine Company.
Cox, Castle & Nicholson LLP took 14,430 square feet at 19800 MacArthur Blvd. Tom Murphy of Jones Lang LaSalle Inc. represented landlord Morgan Stanley in the $3.8 million, 10-year deal.
CB’s Bender said growing companies should lock in today’s rental rates.
Several brokers have speculated office rents are set to rise solidly this year. Economists expect job gains this year to be concentrated in professional services, which tend to occupy office space.
