Industrial projects in Irvine are seeing a major revival, after decades of little to no significant development for the product type in Orange County’s fastest-growing city.
Plans for nearly 2 million square feet of larger-sized projects are either currently under construction or in the works in the city, brokerage data and city records indicate. The projects include a mix of new development on unused land and the conversion of outdated properties into new warehouse and distribution facilities.
It’s a stark contrast from pre-pandemic trends in the city, especially in the area around John Wayne Airport, where millions of square feet of older industrial space were torn down to make way for infill rental and for-sale housing projects and other developments.
The city’s taken note of the rising interest in the property type, last year saying that over “the past approximate 18 months, staff has noticed many more inquiries about these types of uses than at any time in the past 10 to 15 years.”
Irvine City Council last year voted down, by a 3-2 vote, a proposed ordinance that would have added more city oversight over any proposed new large warehouse developments.
Red Hill Redo
The latest addition to the city’s mix of such product types is the conversion of Inwood Park, a roughly 160,000-square-foot office complex on the corner of Red Hill and McGaw Avenue.
The two-building office campus, at 17300 Red Hill Ave., sits near the headquarters of Edwards Lifesciences Corp. (NYSE: EW) and Pacific Dental Services; demolition work was underway at the site as of last week.
The property will soon be home to a 156,632-square-foot warehouse, dubbed Red Hill Logistics Center.
The facility, which will feature 18 dock-high doors and at least 8,000 square feet of office space, is expected to deliver in the fourth quarter this year, according to marketing materials.
The property’s owner, Des Moines, Iowa-based insurance and investment management company Principal Financial Services, bought the office campus last August for $44 million from a joint venture between New York-based asset management firm TPG Angelo Gordon and commercial real estate firm Lincoln Property, which counts a large local presence.
The project joins a host of industrial developments set to deliver in Irvine this year, including LogistiCenter at Irvine I & II by Reno, N.V.-based developer Dermody Properties, which recently purchased one of its lots from Irvine-based master developer Five Point Holdings LLC (NYSE: FPH).
Irvine, like much of South OC, has limited new industrial inventory. The majority of the city’s existing industrial buildings, which totals about 11 million square feet in the airport area, and another 10 million square feet in and around the Spectrum, were completed in the 1970s and 1980s, according to real estate brokerage data.
Vacancy rates for the city’s base of industrial product runs around 2%.
The recent uptick in Irvine’s industrial development comes as the sector begins to stabilize after last year’s record-high interest rates.
Compared to other product types, “industrial assets have proven to be very durable,” Dermody Southern California Partner Matt Mexia told the Business Journal. “They’re supported by the historic rental rate growth we saw in previous years, high barriers to entry for new development and the continuing changes in consumer behavior bolstering e-commerce.”
Dermody, which specializes in industrial development, entered the Orange County market with the 2022 purchase of a 14-acre site in Tustin from Ricoh Electronics, a manufacturer of maker of digital copiers, printed circuit boards, printers and other products.
Ricoh once counted a sizeable real estate presence via a collection of buildings largely fronting the Costa Mesa (55) Freeway, but its local footprint over the past several years, with operations moving out of the state.
Dermody developed the Ricoh site it bought into its first OC project: LogistiCenter at 55 in Tustin I & II. The 311,770-square-foot, two-building facility along the 55 Freeway delivered last year and is among the larger industrial developments in the county. Leases for the site haven’t been disclosed; CBRE has the listing for the project.
Months later, Dermody secured its first two Irvine parcels: the 5.9-acre site at the southeast corner of Alton Parkway and Muirlands Boulevard it bought from FivePoint for $28.3 million and the adjacent 4.3-acre lot at 2 Sterling it purchased for $21.1 million from Tampa, F.L.-based Primo Water Corp.
The parcels will house Dermody’s Irvine LogistiCenters, which will run about 225,000 square feet total. Officials expect the project will be complete by fourth quarter this year.
While Dermody’s Irvine LogistiCenters will wrap up in the fourth quarter, a nearby and much larger industrial multi-building project is expected to break ground around the same time.
Plans for that 31.9-acre site, which FivePoint sold to a joint venture between New York-based real estate investor Tishman Speyer and Japanese real estate developer Mitsui Fudosan for $145.9 million, call for four industrial buildings, totaling around 600,000 square feet.
The project, located on the intersection of Bake Parkway and the Santa Ana (5) Freeway, is part of a $500 million joint venture established in 2022 between the company and Mitsui Fudosan focused on industrial acquisitions, a new product type for Tishman, which is better known for its office portfolio.
Tishman’s $145.9 million acquisition marks the biggest non-residential land deal in Irvine since locally-based quantitative finance hedge fund TGS—run by one of the area’s most under-the-radar billionaires, Fred Taylor—paid FivePoint $240 million for a nearby 42-acre parcel of vacant land nearly a year ago.
Plans for TGS’ land have yet to be disclosed.
Of the three other large Irvine industrial projects set to complete this year, two are expected to deliver this month.
Among the two is 1062 McGaw Ave., a 120,656-square-foot warehouse along the 55 Freeway. The project is a redevelopment of a site that last held a manufacturing building built in 1965; it was demolished in 2022.
Another redevelopment is 18582 Teller Ave., a 136,612-square-foot warehouse along Jamboree Road, near the San Diego (405) Freeway entrance. The site, next to the Boardwalk office project, was previously eyed for offices, a hotel and other uses before being sold to Los Angeles-based Ares Management Corp. in 2021.
Also in the works is a 137,698-square-foot warehouse at 17451 Von Karman Ave., adjacent to one of Amazon’s first fulfillment centers in OC. The development, which is nearing completion, is an overhaul of the former 91,420-square-foot building that long held the local base for Irvine-based specialty coatings supplier Deft Inc.
Manhattan Beach-based 9th St. Partners LLC, a developer of infill industrial properties, paid a reported $26 million for the site about three years ago.