An industrial development is slated to be built in east Anaheim, adding more warehouse and distribution space to a local market that? facing its toughest leasing environment in several years.
Anaheim-based Pacific Sunwear of California Inc. recently closed on a deal to sell a roughly 6.3-acre plot of land next to its headquarters on East Miraloma Avenue.
The buyer is Irvine-based developer Sares-Regis Group.
Sares-Regis Group?hich also has a 312-unit apartment complex going up in Anaheim, near North Tustin Avenue and the Riverside (91) Freeway?s planning a three-building industrial project at the site.
The plan includes one 60,000-square-foot industrial building and two 30,000-square-foot buildings, according to Sares-Regis.
While larger and older industrial properties in the area are having trouble leasing up, there? little in the way of newer industrial properties in the 30,000 to 60,000 square foot range, which bodes well for the new Miraloma Avenue project, said Larry Lukanish, Sares-Regis vice president.
The company? plan will to be to offer the three buildings either for sale or for lease. Final plans for the site are still being finished up, Lukanish said.
Terms of the deal were not disclosed. Brokers put the price for the land at close to $13 per square foot, or about $4 million. Pacific Sunwear is believed to have initially paid close to $33 per square foot for the land in 2006.
Pacific Sunwear had been holding the land for future development, but it said late last year it was looking to offload the parcel as the clothing retailer worked to handle falling sales. In a recent earnings report, the clothing retailer said it was recording a $5 million impairment charge on the planned land sale, associated with the property? drop in value.
It would be the second sale PacSun? made for land and buildings next to its headquarters in as many years. The first deal made money for the struggling company, which has moved its distribution operations out of the state in order to cut costs.
Last year, PacSun sold off its 300,000-square-foot distribution center just off Miraloma Avenue to Sacramento? Panattoni Dev-elopment Co. and financial partner ING Clarion Partners LLC, part of ING Groep NV, for $24.5 million.
PacSun said it recorded a gain on the sale of the distribution center of about $9 million.
Panattoni? still looking to find a tenant for the property, which the developer is incorporating into its massive Anaheim Concourse project. The project primarily consists of former Boeing Corp. office buildings in the region that it plans to redevelop.
Other Panattoni buildings in the area also are being marketed for sale to potential user-owners, as well as for lease. Two nearby empty former Boeing buildings that total some 400,000 square feet of space, at 3330 and 3370 East Miraloma Ave., are listed for sale for about $38.5 million, according to CoStar Group Inc.
La Palma Corridor
Panattoni? difficulty landing a tenant for the PacSun and former Boeing properties isn? a rarity for the massive industrial area local brokers call La Palma Corridor, which runs along La Palma Avenue from Kraemer Boulevard to Anaheim? border with Yorba Linda.
There? close to 20 buildings larger than 50,000 square feet that are vacant and available for lease on La Palma Avenue and nearby streets. In total, those buildings count some 3 million square feet of available space, according to Louis Tomaselli, executive vice president with the Orange office of Voit Commercial Brokerage LP.
Those vacancies in east Anaheim make up the bulk of the city? empty space. At the end of the first quarter, there was a total of 5.2 million square feet of available industrial space in all of Anaheim, which counts an industrial base of roughly 45 million square feet, according to Voit figures.
Vacancies have been ramping up in La Palma Avenue for the past 18 months or so, thanks to limited tenant activity, company closures and consolidations, according to Tomaselli.
The biggest issues with vacancies in the area are in buildings 100,000 square feet or larger, which largely served big-box retailers, said Brad Bierbaum, senior vice president for the Anaheim office of CB Richard Ellis Group Inc.
With the economy souring, those buildings have increasingly been vacated, in some cases by tenants who have used the increased inventory to consolidate operations into one building, according to CB Richard Ellis First Vice President Ian Britton.
Smaller industrial buildings the size that Sares-Regis plans to build on Miraloma Avenue are holding up better locally, Britton said.
For the larger industrial properties, rental rate pressure from outside the county is starting to be felt more in North County? industrial market, according to brokers.
There? close to 57 million square feet of industrial space available for tenants in Corona and elsewhere in the Inland Empire, at monthly rates about 30 cents per square foot below what? being offered in Anaheim, according to Bierbaum.
Larger tenants ?re starting to look over the hills?to the more affordable Inland Empire market, Bierbaum said.
The asking rental rate for industrial buildings in Anaheim stood at about 62 cents per square foot at the end of the first quarter, according to Voit? data.
But with tenant activity limited, and few deals in the pipeline, figuring out the best rates to market area properties has proven tricky for landlords, according to Tomaselli.
He? been advising landlords that they need to adjust rents closer to their 1999 to 2000 levels in order to capture tenants.
?n a market that? 10% to 12% vacant, and no tenant activity, we think that? the best (strategy),?Tomaselli said.
Effective rents are now off 20% to 30% from their peak of mid-2007, Bierbaum said.
