Real Estate Watch: South County
Big Demand for Small Space in South County
The South Orange County market continues to be a hotbed of sales activity for small buildings.
There are 210 small industrial and office buildings under construction or planned for completion by mid-2004.
Buyers continue to show interest with brisk presale activity.
Although interest rates haven’t put a stop to the activity, close attention should be paid in making investment decisions as sales prices in the $195 to $215 per square foot range outpace market lease rates.
But the benefits to own still are very favorable for users, and interest rates would need to increase more than 2% to overshadow the benefits of owning. The most prominent means of financing sale deals is loans from the Small Business Administration.
The projects are offered as “planned unit developments” or condos, three parking spaces per thousand square feet and 40% to 60% improved.
The biggest demand is for buildings less than 6,000 square feet. The average size is 3,000 to 4,000 square feet.
In the past year, South County has seen an average of 70 sales of small buildings per year.
The next 12 to 18 months should prove to be an interesting time for small building sales.
The Irvine Company has provided small land parcels for sale to users and developers planning small “spec” buildings. The parcels are from 1.3 to 3 acres.
And, with sales activity continuing to be strong, the Irvine Co. is considering dividing down larger parcels into more small parcels. Prices are from $27 to $30 per square foot.
Multitenant projects in South County still are strong with 92% occupancy on average.
With lease rates from $0.85 to $1.15, triple net rates are starting to creep up.
Buildings 50,000 square feet and larger are having difficulties; lease and sale activity is moderate in these larger buildings. Lease rates are $0.45 to $0.55 triple net.
Analysis provided by Chris Bates, David Bolt, Cameran Lindee and Jon Marchiorlatti in the Newport Beach office of CB Richard Ellis.
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