Beer, jam, ceramic tiles and God are behind one of the busiest stretches of activity North Orange County’s industrial market has seen in years.
Close to $100 million in industrial sales and lease deals have been announced in the past few months in Anaheim and neighboring cities, putting life into a market that lost more tenants than it gained in 2008, 2009 and the first half of 2010.
“Deals are getting done at pretty good rates,” said Clyde Stauff, executive vice president in the Irvine office of brokerage Colliers International, who has worked on close to 1 million square feet of deals of late in Anaheim and across the Los Angeles County line in Santa Fe Springs.
New North OC tenants announced in the past few months include Tustin-based Straub Di-stributing Co. Ltd., a longtime local distributor of Budweiser beer, which recently inked a 15-year, $37.5 million lease in Anaheim—the biggest industrial lease in the county this year.
The 281,000-square-foot lease with Ana-heim-based landlord Sares-Regis Group will result in Straub moving its headquarters to La Palma Avenue and setting up shop in a building previously owned and used by garden furniture company Galleria Inc.
Also moving to Anaheim is Eleganza Tiles Inc., a ceramic tile distribution company. Eleganza will shift its headquarters from Fullerton after signing a 10-year lease for an empty 144,000-square-foot building on E. Coronado Street.
It’s a nearly 50% expansion in terms of space for Eleganza.
In addition to leases, big-dollar sales are beginning to ramp up in North OC.
Sares-Regis paid about $20 million, or about $71 per square foot, in a lender-driven sale of the former Galleria property it’s now leasing to Straub. The deal closed this summer.
Other prominent buildings changing hands include a 200,000-square-foot production facility in Placentia long used for production of Knott’s Berry Farm jams and preserves.
Newport Beach-based developer Western Realco LLC snapped up the building—which had been vacant for more than a year—this month for about $10.3 million. It plans to renovate the facility for more general uses.
Larger deals nearing completion include a 20-acre purchase by Fullerton’s Eastside Christian Church, which is looking to relocate its growing ministry to an Anaheim site formerly owned by Boeing Corp. that had been empty for several years (see story, page 32).
Owner-user sales, such as the deal proposed for Eastside Christian in Anaheim, made up the bulk of the smaller industrial sales seen earlier this year. Now larger investors are looking to get into the action, market watchers said.
“There’s no shortage of money sitting on the sidelines” waiting to do deals these days, said James McFadden, executive vice president and co-managing director for the OC brokerage operations of Grubb & Ellis Co.
“Institutional money is available and aggressively seeking industrial buildings,” Stauff said.
Investors
Officials for Los Angeles-based Rexford Industrial LLC are one of the deep-pocketed investors eyeing OC for bargain deals.
The company, whose management team includes two former executives with office landlord Arden Realty Inc., said it’s looking to buy some $500 million of industrial buildings in Southern California.
Rexford is targeting smaller buildings in OC that other institutional investors might overlook, and last month made a $7.8 million buy in Santa Ana. The company still has a few years to make opportunistic buys in the area before pricing returns to peak levels, said senior managing partner Howard Schwimmer.
All told, North OC sales and leases, combined with a couple other recent deals, will take more than 1 million square feet of empty industrial space off the market, assuming a few of the deals currently under contract close.
It’s the most activity for deals above 100,000 square feet seen in North OC in more than two years.
The area counts some 100 million square feet of total industrial space. That’s roughly 40% of OC’s total industrial base.
A little more than 10% of North OC’s industrial space is vacant or available for lease.
The latest bout of deal-making “suggests that the market is stabilizing,” said Ian Britton, a first vice president with the Anaheim office of CB Richard Ellis Group Inc., who represented the seller—the Knott Family Co.—in the deal for the former jam-making plant.
“There’s more belief that the end (of the downturn) is on the horizon,” said Jeff Read, a Grubb & Ellis executive vice president, who represented Western Realco in the Knott’s sale. “It wasn’t that way before.”
North County’s recent spate of deals has helped the OC industrial market at large post its best overall quarter in nearly two years.
The number of deals is being fueled in part by falling lease and sales rates, which continue to go down, according to data from Newport Beach’s Voit Real Estate Services.
It’s not just North OC that’s seen an improvement in industrial deals.
In the first nine months of 2009, there was only one industrial sale of a building larger than 30,000 square feet in the area around John Wayne Airport and South OC, according to data from the local office of Grubb & Ellis.
This year, there have been 10 sales of South County industrial buildings larger than 30,000 square feet.
The activity is beginning to limit the number of modern, larger warehouses and other industrial facilities in the area that are available for prospective tenants. That could lead to higher pricing and lease rates going forward, Collier’s Stauff said.
“Lease rates aren’t going back to 2006 levels” but they could start trending upward, said Stauff. Rising rents and a lack of new product on the market could motivate a few developers to start building industrial projeccts again if they find affordable land, he said.
