By IAN BRITTON
The industrial submarkets of North/Central Orange County remained healthy in the first quarter, marked by low vacancy rates, increased tenant demand and escalating lease rates.
The diverse supply of efficient, small to midsize buildings continues to attract the region’s expanding small-business base.
There is an increasing and consistent demand for industrial space in all size ranges.
The industrial market’s momentum comes from several sources, including local distributors seeking close proximity to the ports of Los Angeles and Long Beach, publicly traded electronics companies targeting a strong and skilled labor base, and local manufacturers looking to own a small building close to their home.
Private investors and institutional buyers continue to target North/Central OC as a primary market for investment capital. Investors are paying record figures for quality, triple net, leased properties.
In the past month, Sares-Regis Group bought a 281,548-square-foot class A distribution building at 4633 E. La Palma Ave. in Anaheim. The company is just one of several motivated investors seeking similar buildings in this market.
On the smaller side, a Ventura family partnership bought a 24,384-square-foot, triple net, leased investment at 1000 Kraemer Place in Anaheim.
Although these buyers differ in size and scope, both of them see value in this evolving market based on the diverse mix of business in the area, overall tenant demand, lack of land suitable for development and consistent rent growth.
With interest rates on the rise, the “user” sale market has tempered slightly.
On several of the new, small-building projects under construction in Anaheim, Brea and La Habra, buyers are willing to pay top dollar for functional properties and view them as solid long-term investments.
A gap seems to be developing between buyer and seller expectations among older, less functional buildings.
These buildings are sitting on the market longer and are trading for much less than the published asking price. This gap is more pronounced in the larger size ranges of about 50,000 to 100,000 square feet.
The industrial market in North/Central OC has remained strong, with lease rates at 56 cents and 75 cents per square foot per month in the first quarter, virtually unchanged from a year earlier.
Most of the larger buildings on the market late in the fourth quarter have been absorbed, including two 111,000-square-foot spaces in the Fullerton Crossroads complex.
Several of the remaining properties, including a 206,787-square-foot space in the Anaheim Stadium area, have leases out for signature,a very positive sign for the market’s momentum.
The industrial markets of North/Central County are expected to sustain growth as the local economy continues to evolve.
The office market in the area also has been strong.
Office lease rates in the first quarter rose 6.8% to $1.89 per square foot per month, versus a year earlier. The vacancy rate of 7.4% was down 11.9% from a year ago.
Britton is a vice president in the Anaheim office of CB Richard Ellis Group Inc.
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