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I’ve written ad nauseam about the imbalance existing between demand and supply of available industrial buildings in Southern California. Since the economy was awakened – akin to Rip Van Winkle – in 2011 and after the mortgage meltdown, we’ve been on an upward trajectory. Recently – in the last six months of 2020 and the first four months of 2021 – we’ve been on turbocharge! If your desire is to lease or buy a 100,000 + square foot class A building in Orange County – you have exactly one choice! That’s it. And, by the way, the building isn’t complete and won’t be until October. What about older stock? Unfortunately, the inventory isn’t more plentiful. Therefore lease rates and sales prices have eclipsed sanity.
You may be wondering what differentiates older buildings – Class B and C – from newer Class A alternatives. These things – age, location, and amenities. During the last construction boom in the mid 2000s, very few industrial buildings in Orange County came equipped with warehouse ceiling heights in excess of 24’. Additionally, the fire suppression system rarely allowed high pile storage without special permitting. Consequently, logistics providers – read. ECommerce folks who stack and ship things to your front door – were forced to consider areas where abundant new construction was occurring – the Inland Empire. Well. That’s about to change! Development pipeline plans 10 new offerings with all the modern goodies of 30’ ceilings and early suppression fast release sprinkler systems. Large truck access will be eased with 180’ turn radiaii. Beautiful new offices will be housed at the entrance.
By the fourth quarter of 2022, approximately 3,200,000 square feet of pristine new warehouses will be delivered to the Orange County market. To put that in perspective – that sum is approximately 2.8% of the base of 116,000,000 square feet. A whopping number!
Where, you may be wondering? Fullerton has three projects totaling over 1,900,000 square feet. Brea three projects with 450,000 square feet. A new development in Orange contains 300,000 square feet. Two projects in Anaheim with 350,000 square feet and finally Tustin with a new 225,000 square foot location.
Underpinning the new construction was a ravenous rush by developers to consume land at the end of 2020 and continuing this year. But, not vacant acreage. 100% of the new product is replacing obsolete manufacturing and flex campuses. A few of the notables – Kimberly Clark, Kraft Heinz, National Oilwell Varco, Schneider Foods, and Universal Alloys. Yep. Very sad to see the manufacturing jobs stripped away.
Many of the major players are in the fray – IDI, Duke Realty, Goodman, Rexford, and Western Realco. Capital is flowing in from internal sources and institutional means. Quite a boom in construction will keep contractors very busy. KPRS, Millie Severson, Oltmans, and Fullmer lead the pack. Finally, our local architects have been drawing like crazy – Hill Pinkert, Ware Malcom, and Architects Orange.
Rents for the new product are projected to be well north of $1.00 per square foot! When I started in 1984 – we were lucky to achieve $.30. My how the landscape has changed!
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at [email protected] or 714.564.7104. His website is allencbuchanan.blogspot.com.