Amazon has struck its largest-ever lease in Orange County, for a recently renovated industrial building running about 414,000 square feet in Santa Ana, real estate sources tell the Business Journal.
The e-commerce giant, whose distribution space in OC now runs about 850,000 square feet, is also said to be eyeing another large industrial property in South County.
Brokerage data indicates Amazon recently inked a deal to take over all of 515 E. Dyer, a warehouse facility a few blocks from the Costa Mesa (55) Freeway and about 4 miles from John Wayne Airport.
The 18-acre site is owned by the local office of Houston-based Hines, which paid about $57 million for the building near the end of 2017, and has subsequently spent millions more upgrading it.
The building was formerly owned and occupied by Royalty Carpets; the now-shuttered carpet manufacturer occupied the building from 2004 to 2017. It’s one of several larger area buildings the company sold after closing its doors.
Hines’ work at the East Dyer building was done to reposition the facility into one “ideal for last mile distribution or more traditional manufacturing and warehouse tenants,” according to the real estate developer.
Hines declined to comment on the new lease, as did officials with the local office of Cushman & Wakefield, which other brokers familiar with the deal cited as having worked on the Amazon transaction.
Amazon’s deal is the largest industrial lease in the third quarter by square footage, according to a new quarterly market report by Voit Real Estate Services.
Only a handful of industrial leases larger than 400,000 square feet have been made in the vicinity of the airport the past few years; that area’s base of 58 million square feet of industrial space is more than 96% occupied, according to Voit’s latest data.
3 and Counting
The Santa Ana facility is the third known distribution spot for Amazon in OC.
It struck its first notable industrial deal in Orange County in 2016 when it snapped up nearly half of Irvine Crossings, a 395,673-square-foot data center and industrial property on Von Karman Avenue, a little more than a mile from the airport.
It’s next to a different Hines-backed property: the four-building Intersect office campus, which was recently put on the market for about $260 million.
The 10-year lease at Irvine Crossings is for the industrial portion of the facility, which includes roughly 200,000 square feet used for distribution services.
In 2017, Amazon inked a deal to take up all of 6400 Valley View St., a 238,000-square-foot building in Buena Park.
Another large local deal could be in the works, in Mission Viejo, sources tell the Business Journal.
The firm is rumored to be in discussions to lease a 322,000-square-foot building in the city; at a 27-acre site that was previously home to Unisys Corp.’s technology division.
The owners of that building, a Newport Beach entity affiliated with real estate investor John Saunders, did not respond for comment on the rumored transaction.
Proximity Key
Amazon’s local industrial presence, while growing, is dwarfed by its leased space in the Inland Empire, which includes at least 14 different distribution centers totaling 15 million square feet.
Its dealmaking in the area of late appears likely to help the firm boost its same-day delivery services in high-density urban areas like OCÂ.
A new report by CBRE Group Inc. highlights a sector growing in popularity: light industrial, or warehouses smaller than those commonly found in the Inland Empire.
The report shows the light industrial product type outperformed others in the past five years, with the biggest decline in availability, down 3.9%, and the largest gain in average rents, up 33.7%.
The industry has boomed “because it’s all about proximity,” said Kurt Strasmann, executive managing director at CBRE.
“Speed is a competitive advantage whether it is about the ease with which your employee base can commute to you or whether it is about the speed with which you deliver your product,” Strasmann added.
Strassman declined to comment on Amazon’s recent moves, but noted that Orange County is an attractive market for the company because of its “dense population with high incomes.”
“Multiple e-commerce companies are drawn to infill sites like Orange County because it’s a perfect environment for online consumption with strong demographics,” Strassman said.
Few New Buildings
Hines’ rebuilt facility along Dyer Road was one of the few newer industrial properties in the airport area.
A new project coming online will bolster supply in the near term.
Aliso Viejo-based Shea Properties is wrapping construction on Shea Business Center at 666 E. Dyer Road—it is across the street from Amazon’s new OC facility.
The project will deliver roughly 500,000 square feet of industrial space across nine buildings, the largest ground-up industrial development near John Wayne Airport in over a decade.
Cushman & Wakefield is handling leasing; no deals there have been disclosed.
