Real Estate Watch: North and Central County
North County Investing Overshadows Leasing
By IAN BRITTON
The North Orange County industrial leasing market continues to bump along the bottom. Low interest rates have created a frenzy of sale activity as prices continue to beat former record highs.
The softening leasing market and increasing availability have created favorable conditions for local companies looking to control their facilities costs, but most North Orange County tenants continue to operate in a very cautious manner.
While the North County leasing market is stuck in a depression first seen three years ago, the flow of investment money into cities such as Anaheim, Brea, Fullerton and Placentia continues at an overwhelming rate.
Private investors, pension fund advisors and real estate investment trusts continue to make North County one of their top targets for acquisitions. One example: AMB Property’s complete rehab of the former Krause’s sofa factory in Brea.
The former Pacific Sunwear of California Inc. corporate headquarters in East Anaheim (5200 E. La Palma Ave.) also is in escrow. The buyer plans to upgrade and reposition the property.
North County’s lack of available land, relatively stable demand and diverse industrial base have spurred investors to stretch a little bit in the hopes of controlling a strong-performing asset as the economy turns around.
Chapman University research shows the state’s manufacturing sector is rebounding, despite the loss of more than 300,000 jobs in California since January 2001. While manufacturing employment is still in poor shape, the state actually gained 3,500 manufacturing jobs in September, the first increase since April 2002.
In a challenging market, new manufacturing operations still are targeting the area due to its qualified labor base.
Larger lease deals of 50,000 square feet and above have been rare in North County for the past several quarters. But there were five leases signed in this size range during the third quarter, versus three in the second quarter.
The larger lease deals imply that some positive absorption is occurring and the overall leasing market is bound to correct itself as interest rates eventually tick up and job growth continues.
New construction is down due to the lack of land for development.
Three pending projects have been well received: Voit Brea Business Park’s 16-building project on the former Tosco site completely sold out, Pacific Gateway Business Park on surplus Boeing land off Miller and La Palma in Anaheim also is finished and presold and the two-building project at Lambert and Puente in Brea, being developed by Cardinal Development, is set to be completed in January 2004.
Britton is a senior associate in the Anaheim office of CB Richard Ellis.
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