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Grocers, Food Cos.: Top Tenants for Industrial Buildings

The past few months have been fruitful for owners of Orange County industrial properties, as several grocery and food-related companies recently signed leases in the area.

The companies—Flowers Foods, Frieda’s Inc., Sunrise Produce and Northgate González Market—have each secured leases for buildings running more than 50,000 square feet in Anaheim, Garden Grove and Irvine. Their combined lease footprint totals nearly 442,000 square feet.

The recent wave follows organic grocer Sprouts Farmers Market Inc.’s lease inked in 2022 for a 337,000-square-foot distribution facility at the Goodman Logistics Center in Fullerton.

Sprouts moved into the new facility last October. The new distribution center will deliver produce to over 95 of its California stores within a 250-mile radius. Officials said the company plans to eventually up that number to over 130 as Sprouts expands its California footprint.

“California is such a great hub for sourcing produce,” Sprouts Chief Executive Jack Sinclair said at the distribution center’s opening event. This facility, which officials say is conveniently near Sprouts’ produce vendors, is “a stepping stone to getting where we need to be, which is the best produce [market] in the country.”

The Sprouts deal marked OC’s largest lease signed by a grocer since 2009, when Northgate moved into a newly built 383,550-square-foot distribution center at 1201 N. Magnolia Ave. in Anaheim. The building now serves as the company’s headquarters.

The county’s growing popularity with grocery companies boils down to its delivery density and availability of properties equipped for distribution, brokers note.

“If you look at a map of grocery stores in SoCal, the greatest concentration is in OC and Los Angeles,” Kevin Turner, executive managing director at brokerage Cushman & Wakefield, told the Business Journal.

That’s because, in OC, “you’ve got a lot of rooftops and disposable income,” added Clyde Stauff, vice chair at Colliers, who specializes in the sale and leasing of industrial facilities in SoCal.

Increased Leasing Activity

Three of the four recent local grocery leases took place in the fourth quarter of 2023, when leasing activity in OC rose 17% from the quarter prior to 2.7 million square feet, according to a report by JLL.

The smallest of those leases was inked by Flowers Foods, a Thomasville, Ga.-based baked goods manufacturer, known for its brands such as Dave’s Killer Bread, Wonder Bread and Nature’s Own.

The company last October signed a lease for a 51,718-square-foot distribution center in Garden Grove.

It’s currently using the facility to deliver its packaged bread products, which are baked in Nevada, to grocery stores across SoCal.

The property, located at 7311 Doig Drive, is a few blocks from Beach Boulevar­d, and not far from the Garden Grove (22) and San Diego (405) freeways.

Aside from its proximity to grocery stores, Flowers Foods was also drawn to the property’s fenced truck yard, which would allow its bread truck drivers to securely store their trucks overnight, according to Turner, who worked on the deal with Cushman & Wakefield’s Brett Swartzbaugh.

Fruit Importer

Another local distribution facility leased to a tenant in the grocery sector was Brookhurst Distribution Center, located at 1765 Penhall Way in Anaheim.

Frieda’s, a specialty fruit importer long based in Los Alamitos, whose most popular products include pink lemons, kumquats and dragon fruit, in October signed a lease for the 128,372-square-foot distribution center.

Frieda’s, founded in 1962 by the late Frieda Caplan, was the first company in the U.S. to import kiwi.

The property, just south of the Santa Ana (5) Freeway, also serves as the headquarters of Legacy Farms LLC, a local produce company.

The move was part of a consolidation effort by both companies, following Legacy Farms’ acquisition of Frieda’s assets last January, according to Turner, who worked on Frieda’s recent lease. Financial terms of the acquisition were undisclosed.

Sunrise Produce

New OC leases in the fourth quarter accounted for 71% of activity, up from the roughly 50% it contributed to the third quarter.

Among those new leases—aside from Flowers Foods and Frieda’s—is Sunrise Produce’s tenancy at LBA Logistics Center, a 165,850-square-foot Anaheim distribution hub.

Sunrise Produce, a Fullerton-based wholesale produce distribution company, has yet to move into the building, located at 1215 N. Van Buren St., which is currently under construction. The project is set to deliver in a few months.

Brokers who were involved in the lease for the property, just a few miles north of the Riverside (91) Freeway, included Ben Seybold, Sean Ward and Keith Greer of CBRE.
Lowest SoCal Vacancy

Overall, OC’s industrial leasing volume saw 1% year-over-year growth in 2023, despite a decline in activity over the summer, the JLL report said.

While vacancy across industrial properties in the fourth quarter was up 2.8% from the year prior, OC still “boasts the lowest vacancy in SoCal,” the JLL report said.

Leasing activity for the area, however, is up from the same period a year ago.

This year so far has seen 154 industrial leases in OC, compared to 136 the area saw last year, according to real estate market tracker CoStar.

The first of this year’s industrial leases was signed on Jan. 2 by Northgate González Market, one of the country’s largest Hispanic supermarket chains.

Northgate is subleasing the space, at 2450 White Road in Irvine, from The Kraft Heinz Co. (Nasdaq: KHC).

The building, which spans 106,862 square feet just north of the San Diego (405) Freeway, not far from John Wayne Airport, holds an existing soup manufacturing facility—complete with freezers, a mixer, a boiler and a vegetable grinder among other pieces of industrial equipment.

Northgate is expected to occupy the building this June. CBRE’s Ross Bourne, Dave Desper, Jake Marthens, Nick Spatafore and Ross Fippinger were involved in the deal.

The sublease follows the opening of Northgate’s newest and largest store concept,
Mercado González, a 70,000-square-foot marketplace in Costa Mesa featuring multiple dining options serving Mexican cuisine alongside the traditional grocery offerings.

The combined food hall and specialty grocery store opened its doors last November.

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