Every week, there are significant changes and developments in the commercial real estate market in Orange County. It is a dynamic part of the country, as well as a very affluent one, which makes it very interesting for businesses and investors alike. So what are the latest developments to be aware of?
The year 2017 is now behind us, and we have entered 2018. 2017 proved to be a good year for the Orange County commercial real estate market. It continued to grow, values continued to break records, and the up-trend is now longer than what it has been in decades. Of course, some people continue to be cautious as a result of the 2009-2010 calamities, but there are now cases where prices are three times higher. Meanwhile, lease rates are showing similar trends. So which lessons have been learned from commercial real esate in 2017 that can be applied to 2018?
Since the inauguration of President Donald Trump just over one year ago, there has been a major buzzword: “reform”. A variety of different things affecting the economy have been or will be reformed. One of the most significant ones is his tax reform, the Tax Cuts and Jobs Act.
The Orange County commercial real estate market, like all other markets, fluctuates. Sometimes, investors should build, but at other times they should rest. This year, it seems that Orange County is an area for construction, particularly for light manufacturing, distribution, and warehouse properties. This is according to this year’s Mansfield Commercial Real Estate analysis.
Orange County, NY’s total inventory of prime industrial space increased to 22.5 million square feet as of year-end 2017. The amount of space that was added to inventory in 2017 exceeded 1.3 million square feet, the most for the County in at least two decades.
The vacancy rate for industrial spaces, meanwhile, dropped from 4.9%, already low, to just 3.3%.
Why Developers Love Orange County Commercial Real Estate
Many developers love Orange County because of how connected it is to highways and other forms of infrastructure. This is why heavy investments are being made in industrial properties. Developers and investors alike feel the market will become even more tight across 2018.
One recent development was completed by Matrix Development Group, who constructed an industrial warehouse in Orange County that is now shared by Amscan, one of the largest distributors and manufacturers of party goods in the country, and AmerisourceBergen, one of the largest pharmaceutical distributors in the country. Meanwhile, companies such as Aurorchemicals have also moved into the area. They stated that access to airports and highways, the welcome from local politicians, and support from the Orange County Partnership were driving factors in their move.
From site selection assistance, financing options, and employment training to marketing, the Orange County Partnership is your premier (no-cost) resource for economic development support.
Development Trends in Orange County Commercial Real Estate
In 2017, the focus was more on build to suit properties. Indeed, 80% of all square feet in Orange County are made up of such properties. This trend is also set to continue. The aforementioned Matrix Development Group wants to redevelop a property to turn it into a 1.2 million sq/ft distribution center. The land they have eyed for this was originally earmarked for the Ridge retail project but this failed and was abandoned by the developer.
The developer proposing to build a 700,000-square-foot retail, dining and entertainment complex on Route 300 in the Town of Newburgh officially announced it is abandoning the project, two months after the Newburgh school board rejected a 20-year tax-break deal.
While abandoning this project was a significant blow, not in the least due to the loss of potential jobs, it was almost instantly decided that the land could serve other purposes and it seems such a purpose has now been found. There is huge confidence in the market and developers like Matrix, including Frassetto, are rapidly meeting demands.
In 2018, Bluewater Industrial Partners aims to develop a 1 million sq/ft warehouse where routes 17K and 747 intersect in Montgomery. Just last year, a similarly huge property was developed in the same area, which is now the FedEx Ground Distribution Center. Last year, only the Matrix Business Center and the McKesson’s project were larger in 2017.
The year 2017 also saw the expansion of Steris Corp’s Chester. About 60,000 sq/ft was added to the building and is now used to disinfect medical supplies. People continue to have confidence in the market and there is even a concern that some businesses have to be turned away from Orange County simply because there is no space.
Indeed, even smaller stores, such as internet distribution companies and ready-made meal developers are looking for space in Orange County. So far, they seem particularly interested in a Sol Eckstein development, who will offer a triple-net lease at $7.50 per square foot.
Investors know that there are vast opportunities in Orange County commercial real estate and that it’s a market that will continue to thrive. Therefore, it’s important for investors to keep the city of Orange County in focus when considering places to invest.
In line with the new tax reform by President Donald Trump, continued job growth, and a good GDP (gross domestic product), it seems that the commercial real estate (CRE) market in both Orange and Los Angeles County will continue to be bullish. This is also according to the latest biannual Forecast Commercial Real Estate Survey by Allen Matkins/UCLA Anderson.
The tax bill is expected to increase the rate of return on commercial real estate and makes investment more attractive. Survey participants predict it will cause moderate though uneven growth.
It seems that 2019 was the year in which people started to invest in hotels across Southern California. This makes sense because it is a hugely popular tourist destination and visitors are happy to pay quite significant prices. So much so, in fact, that there are now some concerns about affordability for the average middle class Californian. Southern California hotel investments are on the rise.
As the weather warms up, families across California are planning summertime visits to the beach. But overnight trips to the state’s famous coastline are becoming increasingly difficult for middle-class residents to enjoy because the price of admission is soaring.
There have been some very interesting appointments and promotions within commercial real estate firms in Orange County over the past few weeks. Firstly, the new Southern California-Hawaii division of the CBRE Group has appointed Lewis C. Horne as their president. This means he will now focus on Orange County, the Greater Los Angeles area, Hawaii, and San Diego. One of the offices he will head is that of Newport Beach.
The commercial real estate market in Orange County, CA, continues to boom and expand, so much so in fact, that some experts are becoming concerned about whether or not this growth is sustainable. However, reports have shown that people in the field of business and commercial real estate are very optimistic, in part due to the new presidency of Donald Trump, who has promised more jobs and more business. Hence, Orange County continues to grow, and so is the economy.
The year 2016 has been a year of records for Orange County with regards to real estate. Prices for residential homes reached heights never seen before, in part due to the large number of new homes being built. The landscape of Orange County has changed dramatically, not in the least thanks to the approval of the Platinum Triangle in Anaheim.
The commercial real estate (CRE) market in Orange County, CA, is incredibly diverse and interesting for many different people. Property investors, for instance, often purchase CRE, either outright or through a commercial real estate investment trust (REIT), in order to earn from the rent of these properties. CRE is also interesting for business owners, who are looking for properties to use for their operations, such as offices, distribution, retail stores, and warehousing. They can choose to purchase their own real estate, making it an investment as well, or they can lease the property from the aforementioned property investors. Either way, it is very important to get to know the market before deciding to rent or lease.