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May 19, 2014
0% Industrial Vacancy?
We're so close to zero in OC, and getting there in the IE. Industrial experts tell us landlords have the ball in their court. (No matter how close you are to zero, don't try to divide by it. Big math faux pas.)
PM Realty Group SVP Tim Joyce tells us that the OC/IE industrial markets are both facing a lack of quality buildings. Vacancies at 2.5% in OC and 7.6% in IE. Based in the Irvine office, Tim's sold or leased over $320M in office or industrial real estate in SoCal in the last five years.
Tim adds that just under 15M SF of industrial space is under construction in both submarkets, which will ease that pressure in the next 12 months. In the meantime, tenants will be facing pricing levels not seen since 2007 (let's turn on Avril Lavigne and get nostalgic), where average asking rents were in the mid- to high $0.60's/SF in OC and mid $0.40's/SF in IE. The tide will shift toward a landlords' market by the end of 2014, he says.
In some ways, IE's got the edge, since there's more space for spec. Stirling Capital Investments COO Brian Parno tells us that its Southern California Logistics Centre, a 2,500-acre complex in Victorville, has shot up to 99% occupied, spurring Stirling to build out two existing spec facilities. Recently, United Furniture Industries inked a 505k SF renewal at the complex so it can expand its manufacturingonsite, increasing assembly lines from six to eight. CBRE's Jay Dick repped Stirling Capital and the Bradco Cos' Joe Brady repped the furniture maker.
Hotels Need That Extra Zing
Demand is also up for hotels in OC, but new properties need high-tech and traditional amenities to stay competitive, R.D. Olson Construction senior EVP of operations Joseph Cervantes explains, especially if catering to leisure travelers. (Presumably that's families traveling with children... which sounds anything but leisurely.) Recently Olson—which has completed 1,000 hotel rooms in California and Hawaii in the last three years—started on the 221-room Courtyard by Marriott in Anaheim, whose prime amenity will be proximity to Disneyland. It will also be an example of Marriott's Gen Next design, which the hotelier has been rolling out since last year.
Property owner Northwest Hotel Corp tapped Olson for the development, which will be completed in June 2015. Gen Next design features include welcome pedestals that replace a traditional front desk, an interactive GoBoard to display news and destination information, and semi-enclosed “media pods” with flat-panel TVs for a place to work, meet, or relax. In this property, Olson (which did a Gen Next at a the Courtyard by Marriott Irvine Spectrum) also has such traditional amenities as a 20k SF water park, a pool and spa, and outside dining space.
Small (Development) is Beautiful
Forget Waldo, can anyone spot Marty McFly? Here's the panel at “Back to the Future: Small Building Developmentin the Inland Empire," a ULI OC/IE event last week in Ontario. Execs from CBRE, Cushman & Wakefield, Fullmer Construction, Shea Properties, and Spectrum Commercial Lender joined San Bernardino County supervisor Janice Rutherford. The takeaway: IE commercial growth is finding the most demand between 10k SF and 100k SF.
ICSC: Live from Vegas!
The retail industry is rocking the Strip this week for the 38th annual ICSC RECon, and Bisnow reporters are live on the scene to bring you the latest. (Unless they sleep late, what with all the parties.) What happens in Vegas this week will surely not stay in Vegas. The 40,000 retail pros in attendance are on a mission to bring back new deals. Buzzwords on the floor this year are growth and expansion, and while many we've asked are cautiously watching this fall's election, it doesn't stop them from crowding the 1,000 booths in search of transactions.
Larger firms like Brookfield have big, techy booths to fuel dealmaking, as national director of retail leasing Ed Hogan showed us. (Time for a quick game of World of Warcraft?) Ed's been leasing up tons of space in high profile properties in LA (FIGat7th) and NY (Brookfield Place). The former is a repositioned mall (acquired via Trizec) where Ed scored the nation's first City Target as an anchor, while the latter is in the giant buildings of Lower Manhattan formerly known as the World Financial Center, counting luxury brands like Ferragamo and Burberry as new tenants. Stay tuned for more coverage.