By BOB GOODMANSON
West Orange County industrial continues to hold the momentum of previous quarters, despite a general market slowdown.
With approximately 40% of goods coming to the U.S. going through the ports of Long Beach and Los Angeles, trade and warehousing continued to be strong in the first half of 2008. An example is Overton Moore’s Pacific Gateway Business Center in Seal Beach, a state-of-the-art development totaling 830,000 square feet. Six of the 10 buildings have been sold there. Three buildings recently sold for $38.8 million, despite the instability in the financial markets.
Of the four remaining buildings, there is strong activity with multiple offers. This 45-acre site was surplus Boeing Co. land that took eight years to get approved due to California Coastal Commission constraints.
Owner-occupied properties for sale continued to be the hot segment of the market fueled by low vacancy and strong demand, with a prevalent trend to quality buildings. Companies locating to the Seal Beach area are a mix of apparel, automotive, household products and appliances, aerospace, pharmaceutical products and construction as well as others in the electronics and banking industries.
However, the slowing velocity of deals,especially in the leasing segment of the market,has pushed lease rates lower.
Fortunately, the number of buildings coming onto the market for sublease has not increased. The overall available supply of industrial buildings remained tight with long-term expectations of favorable growth.
Also, industrial buildings continued to be the investment choice with institutional and private investors. The recent sale-leaseback of a building occupied by an aerospace company and consisting of 58,867 square feet in Huntington Beach sold for $7.65 million. The building traded at a 6.25% capitalization rate for the 10-year leaseback. Its location,strategically between Los Angeles and Orange counties and close to the ports of Long Beach, Los Angeles, freeways and airports,has been impacted by recent trade growth, particularly from trade with Pacific Rim countries.
Absorption continued with companies wanting to operate in an area that has a low crime rate and high quality of life. Supply and demand coupled with geographic strength will remain the determining factors in the remainder of 2008.
Goodmanson is a senior vice president in the Newport Beach office of CB Richard Ellis Group Inc.
