Blockbuster office and apartment transactions took center stage in Orange County last year, while industrial and retail sales failed to attract as many deep-pocketed investors.
The Business Journal’s annual listing of the 10 top commercial sales in each of the office, multifamily, industrial and retail sectors here in 2018 covers about $3.2 billion worth of dealmaking (see listings, this section).
That total is down from $3.4 billion in 2017, a nearly 6% decline, but still marks the fourth year running that the cumulative sales total reported in this issue’s Top Deals section tops $3 billion.
Not many of the area’s top commercial real estate brokerages are sounding the alarm bells about the decline, in terms of a potential slowdown in 2019.
“Orange County is exceptionally well positioned, and there is a lot [of new transactions] being underwritten,” said Kurt Strasmann, executive managing director for the local office of CBRE Group Inc., the area’s largest commercial brokerage.
A few notable deals have already concluded in the first few weeks of this year, such as the nearly $200 million sale of Albertsons Co.’s massive distribution facility in Brea, the largest single-building property sale in OC in over a year.
The deal closed in the first days of January, according to property records, while a related leaseback of the 1.2-million-square-foot facility was reported to be completed just before the year ended—it ranks No. 1 among industrial leases in the area last year, according to data from real estate market tracker CoStar Group Inc., whose data was used to compile the Top Deals listings, along with Business Journal research.
Office Leads Way
Office transactions represent the largest commercial real estate product type sold here in 2018. The 10 largest office deals totaled about $1.2 billion, about 38% of the total dealings listed here.
Similar to last year, when this product type totaled $1.5 billion, more than half of the transactions exceeded $300 per square foot. Six years ago, deals topping $300 per square foot were a rarity in the listings.
Eight office deals topped the $100 million mark last year, up from five in 2017; only seven sales reached that amount in the other product types, with apartment buys representing six of those seven nine-figure sales.
Small signs of a slowdown in investment—a pullback in institutional capital partners and fragmented industry sectors—were quickly dashed as private investors stepped in.
Notable 2018 office buyers include Broadcom co-founder Henry Samueli and his investment firm’s $125.5 million purchase of the Anaheim Corporate Center campus near the Honda Center, and Boston’s Rockpoint Group, which entered the OC market in May with its $157 million buy of the Summit Office Campus in Aliso Viejo.
Leasing Hub
About 1.2 million square feet of office space was included in this year’s top 10 leases, including renewals for Taco Bell, OptumRx Inc. and AECOM, as well as new locations for Glaukos Corp. and Anduril Industries Inc.
Last year’s cumulative figure is down from the 1.9 million square feet represented in the top office leases of 2017.
There are plenty of brand new and massively renovated offices popping up around the county to accommodate additional tenants seeking larger blocks of space.
New and under-development office projects, like Boardwalk, Flight and the Press, are likely to continue to drive OC office leases in the next few years, not to mention ongoing ground-up office development in the Spectrum area by Newport Beach-based Irvine Co.
Growing demand for industrial and multifamily properties, meanwhile, will continue to represent opportunity for OC investors in 2019.
Scarcity and a high barrier to entry will drive demand for the first, while multifamily development is “the gift that keeps on giving,” Strasmann said.
The 10 largest apartment sales of 2018 totaled about $1 billion, with deals running from San Clemente to Huntington Beach.
In the News
Here are some of the other notable 2018 commercial transactions:
• Portfolio buys were a frequent choice for investors in 2018, including the No. 1 office sale: Lincoln Property Co. and Angelo Gordon & Co.’s $161 million purchase of an eight-building office portfolio in Irvine and Newport Beach. The deal worked out to $302 per square foot.
• Newly formed Irvine-based investor and developer Kelemen Co. is planning upgrades to the Atrium building in Irvine, the pair of connected 10-story buildings it bought for $106.8 million, or $352 per square foot, in August. Improvements for the 302,877-square-foot building include tenant-amenity additions like eateries and gathering spots.
• Expect to see a growing presence on the leasing front from WeWork and other shared space operators in Orange County. WeWork, the country’s fastest-growing operator of coworking space, inked a deal in September to take up 63,816 square feet in the Boardwalk office development on Jamboree Road. Last month, it signed another Irvine lease for nearly 70,000 square feet at the 2211 Michelson office tower, making it the sixth OC building for the New York-based firm.
• The sale of the Beckman Coulter Campus in Brea took the No. 1 slot for industrial sales. The local office of Houston-based real estate developer and investor Hines paid $115.3 million in a venture with Los Angeles-based Oaktree Capital Management LP for the five-building collection of buildings, which remains leased to Beckman.
• Two Anaheim apartment buildings made the top 10 sales in that sector: Stadium House on Katella Avenue and The Crossing on La Palma Avenue. The former, No. 5 on the list, is the 251-unit rental complex, previously called Avalon Anaheim Stadium, which traded hands in June for $111.6 million. Irvine-based apartment investor Advanced Real Estate Services Inc. bought the property and is planning $5 million in upgrades. RedHill Realty Investors LP bought the latter at the beginning of last year for $106 million.
• Anaheim was also home to the No. 1 retail transaction: the $80 million purchase of the long troubled GardenWalk shopping center near Disneyland Resort and the Anaheim Convention Center. Only one other retail transaction topped the $50 million mark in 2018: the $65.5 million sale of Edinger Plaza in Huntington Beach.
