Commercial Real Estate

Northern Orange County Sees An Increase In Industrial Real Estate Supply

industrial real estate in northern orange county

Orange County is notoriously low in its supply of industrial properties. However, it now seems that change is afoot. A 232,000 square foot, four building project will soon start construction in the northern part of the county.

Panattoni Development Project

The construction is being led by Panattoni Development Co..

With an expansive international platform, Panattoni Development Company, Inc. specializes in industrial, office and build-to-suit development. Our 24 offices in the United States, Canada and Europe are responsible for development of over 302 million square feet. Each office is rooted in the local community with strong partnerships that produce the best results for our clients in each region.

Daum Commercial as Broker and Leasing Agent

The company, which has global offices, has agreed to start an industrial project on the borders of Placentia and Anaheim. At present, the vacancy rate in this industrial market is just 1%, which shows the urgent need for more property. The upcoming construction is unique because it could offer four different tenants. The sizes of the units range from the largest at 69,882 square feet to the smallest at 47,813 square feet. Panattoni expects that the lease up will be completed very quickly and very soon. The land sale for the property was brokered by Daum Commercial‘s EVP, Chris Migliori. He will continue to be the exclusive leasing agent once construction has been completed.

Based strategically in Orange County’s corporate district, DAUM’s Orange County office serves the entire Orange County region. The area is populated by an abundance of corporate headquarters for major companies in Southern California, including several key financial and high-tech firms.

Migliori understands how challenging Orange County is for industrial development due to the fact that so little land is available. There are only a very select few sites remaining and, once they become available, they are usually zoned for residential development. Panattoni was lucky, therefore, to be able to acquire the 10 acre parcel of land, and Orange County is lucky that they were the ones to snap it up, as it means a new industrial development will be completed.

High Demand for Industrial Space in Orange County

The Orange County industrial supply market is incredibly tight in general, but nowhere more so than in the northern part of the county. This is because the location is so centralized, providing it with excellent access to freeway systems and other amenities and infrastructure. It is not expected that demand will decline any time soon either.

Direct/sublease space (unoccupied) finished the quarter at 2.15%, one of the lowest figures seen since the fourth quarter of 2016 (2.13%) and a decrease of 1.83% when compared to the first quarter of 2017. Expect vacancy rates to stay low as the limited and shrinking inventory of quality buildings is quickly absorbed by a motivated pool of tenants.

The vacancy rate for industrial supply across the country averages at 1.5%. Additionally, the rental rates have, as a result of this, increased significantly. Year on year, they have averaged an increase of between 5% and 6%. This also means that owning industrial property is a very lucrative business for those who are able to get into it. The northern parts of the county, meanwhile, have long been the tightest market when it comes to industrial property and this is still true. Vacancy rates are only slightly higher than 1%, particularly because businesses want to have access to state routes 55, 57, and 91, as well as to interstate 5.

Bright Prospects for the Industrial Development Project

The project has only recently started and is still a long way away from completion. Nevertheless, Migliori has reported that some interest has already been raised and potential and prospective tenants have started to come forward. These are exciting times, not in the least because Orange County is already home to such a diverse variety of industrial companies. It is home to biomedical, construction, flooring, ceramics, distribution, food preparation, apparel, manufacturing, automotive, and aerospace companies to name but a few.

Because of the fact that interest has already been expressed for the property, it is expected that the rental rates will also be significantly higher than the market average. Already, lease rates have started to increase across the board and due to the demand, Panattoni is likely to be able to charge even more. There are even some concerns that lease rates will soon skyrocket and that companies, such as Panattoni, will be able to take a lot of advantage from this.

The market has continued to move decisively forward at a rapid pace spurred on by limited inventory and optimistic landlord sentiment. We find ourselves in a period where the option value of vacant space can be worth more than it would otherwise be if leased at today’s equilibrium rent.

Another reason for the high demand, translating into high rental rates, is because very little of the existing industrial real estate stock is considered to be class A. What this means is that many properties do not meet standards such as a secured, private concrete yard, docks, and a 30′ clearance height. The more requirements a prospective tenants have for a property, the more difficult it will be for them to find such a property and the more they will have to pay for it. Across Orange County, options are becoming increasingly limited. Thus, this new four building construction may just attract businesses that are on the lookout for new corporate headquarters.

Expectations for the New State of the Art Facility

Once completed, a new class A, state of the art facility will be available in Orange County. It will have two floors with executive office spaces, warehouses with 30 foot clearance, grade level and dock high loading, an ESFR sprinkler system, and concrete, secured truck courts. It will, effectively, be everything that an industrial business could possibly wish for. Needless to say, many commercial real estate professionals are watching on with interest and are excited for the team at Daum Commercial for having been able to secure this deal. Residents of Orange County, meanwhile, are excited about the businesses that will set up shop in the new property.

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