Tustin is expected to get its largest new industrial development in over a decade, following the purchase of a 10-acre site near the intersection of Jamboree Road and the Santa Ana (5) Freeway by Panattoni Development Co.
The Irvine-based firm, among the largest privately held industrial developers in the country, recently completed the purchase of an existing building along Myford Avenue used by an affiliate of AT&T Inc., as well as excess land at the site.
Panattoni paid $32.4 million for the site at 14451 Myford, in a short-term sale-leaseback deal with AT&T; plans for a new development on the site are already underway, according to the new owners.
The deal works out to $3.3 million per acre.
Last-Mile Focus
A lack of available land in Orange County has prompted industrial developers to get creative in their redevelopment efforts.
“Finding deals in the area has been getting more and more difficult, but we are remaining active and looking for opportunities” to meet growing demand for manufacturing and last-mile distribution centers, said Panattoni Partner Jacob LeBlanc.
Panattoni bought the site in a venture with Link Industrial Properties, an affiliate of New York-based Blackstone Group.
The property currently holds a 92,000-square-foot building that’s been long been home to AT&T, which uses the space as a training facility.
That building is expected to be razed to make way for a new development; specific details for the expected multibuilding project are still being finalized, according to LeBlanc.
The company projects a year-long construction timeline for the site, which will be built on a speculative basis.
“It’s a great location for a distribution center or manufacturing facility that will serve South Orange County,” said LeBlanc, adding that the e-commerce sector has been generating strong demand for logistics facilities in the county.
Tustin’s base of industrial buildings runs about 4.1 million square feet, and counts a vacancy rate of about 3.5%, according to data from Voit Real Estate Services.
The city has seen a flurry of commercial development activity this year, with the Flight office campus opening in early 2019, and a new headquarters on the books for SchoolsFirst Federal Credit Union.
Fully Leased Commerce Center
The Myford Avenue deal is the latest in Orange County for Panattoni, the developer of close to 2 million square feet of industrial space in the county over the past decade.
Its largest project over that time was the Anaheim Concourse, at that city’s former Boeing campus; the collection of for-sale and for-lease building runs close to 1.6 million square feet and is among the largest area ground-up industrial projects in recent years.
Two years ago, it began building the Orange County Commerce Center, a four-building industrial project in Placentia that wrapped construction early this year.
The developer paid a reported $17.7 million for that 10.2-acre site, or $1.7 million per acre.
The new 232,354-square-foot project in Placentia is now fully occupied, after securing its fourth and final tenant last month through a deal with LG Hausys America Inc.
The first deal inked at the property was in January when Beacon Roofing Supply Inc. (Nasdaq: BECN) signed a 10-year, nearly 70,000-square-foot lease for the building at 721 S. Van Buren St.
That deal was followed by one with Webgistix, a logistics entity owned by Rakuten Inc.; and U-Haul Company of California.
Historic Low Levels
Panattoni’s proposed Tustin project would be the second sizeable industrial project in the vicinity of John Wayne Airport; the only other multi-building industrial property under construction in the area is the Shea Business Center, a nearly 500,000-square-foot project along Dyer Road, in Santa Ana.
Cushman & Wakefield is handling leasing for that project.
A recent Colliers industrial report noted that “new construction in Orange County remains limited while existing product continues to be converted to alternative property uses.”
“With just 505,400 square feet of space under construction and strong industrial demand, vacancy rates are expected to remain at historic lows,” the report said.
During the third quarter, industrial vacancy rates dipped 20 basis points to 3.7% while rental rates increased 3.3% from year-ago levels, according to Colliers.
