Bisnow (RawSpace-Crowd) LEADER
January 5, 2015

OC Sales and Leasing
Volumes Will Surge in '15

Investor appetite for commercial properties is going to reach new highs in 2015, Irvine-based Faris Lee Investments CEO Rick Chichester tells us. More capital's going to be flowing into the sector than ever before, both locally and nationally.

Key to the additional strength of the market this year will be increasing demand for investment properties, Rick says. “Foreign capital from areas like Eastern Europe and Asia will be extremely aggressive,” he says, adding to the already healthy demand from domestic investment sources. Also, he expects capital infusion from other sources, such as hedge funds looking to increase their allocations into the commercial real estate sector.

Macro-factors are at work, too. Low interest rates, combined with the increase in capital seeking risk-adjust yields, will mean further cap rate compression. Rick tells us sellers will have more opportunity than ever to monetize their equity and that now is the perfect time to look for a deal. Snapped: the 16k SF 16655 Noyes Ave in Irvine, which is fully occupied by Kiddie Academy, a daycare center. Late last year, Farris Lee repped the seller, while Treeline Realty repped the buyer, Everwin Investments. The closing cap rate was 6.5% and the trade was just over $367/SF.

In the OC office market, PM Realty Group Western Division EVP Jim Proehl tells us he expects to see significant increases in rental rates this year, probably 8% to 10%. Office rents are still well below the last peak in 2007 and below the level required to build new office properties, so development is still unlikely this year. But Jim says space in the best buildings is quickly disappearing and competition will result in fewer concessions and quickly rising rates. (Jim's snapped at NAIOP's Y Games last year.)

In retail, Coreland Cos senior associate Ben Terry (snapped at his annual fishing trip to Panguitch Lake in Utah) tells us grocery-anchored neighborhood shopping centers will continue to lead the sector, as they have for the past five years. Though they will see the strongest occupancy growth in Orange County, there will also be significant changes in the market, he explains. Ben notes the effects of the Albertsons-Safeway merger are yet to be felt. Pacific Northwest retailer Haggen Food & Pharmacy will acquire 11 of these sites in OC, and Ben says it will be interesting to see who else steps into the market.

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Chase (NoFees) OC
Swinerton (CommunityContractors) OC
Dbac (NewWebsite) OC
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The Best Local Creative Office Space

Jasper Sanidad

Everyone makes New Year's resolutions, and one of ours is to showcase more creative office space. That's because it's catching on here in SoCal in a big way, as our local Office of the Future speakers pointed out this fall. This week's creative office is Beats Electronics, whose 110k SF HQ in Culver City was designed by Bestor Architecture and built by Howard Building Corp (HBC). Beats specializes in advanced sound systems, including headphones, earphones and speakers, but also software and music streaming. HBC, with offices in Downtown LA and OC, is pushing creative design forward, with clients such as Google, YouTube, FoxHead and RiotGames.

Jasper Sanidad

For those not familiar with Beats Electronics, you may recognize its new parent company (Apple). Three interconnected buildings characterized by collaborative space are home to Beats' research, design and development teams. Finishes include large areas of rich blue and red walls (as seen here), along with graphic wall coverings, metal and wood panels, and wood and concrete flooring. Amenities include a café, gym, four barista stations, and outdoor lounges, as well as a mixing studio and an acoustical testing lab that supports the engineering of Beats products.

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Five Star (NoWater) OC
Xceligent (Director) OC
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Good Properties Hard to Find in OC

CBRE senior managing director Kurt Strasmann still believes what he told us last spring about the OC office and industrial markets: they were tight in 2014, and that's not going to change this year, he says in an interview with GlobeSt. That's going to drive up rents in office and industrial properties, adding to the challenge of finding industrial space, since OC has the second-lowest industrial vacancy rate in the country (2.7% in Q3, according to CBRE). And there won't be much development, since multifamily developers tend to win when it comes to taking usable sites.

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CCIM (KickStart) OC
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If you find ten cents in each of your pockets, be glad of the new paradigms. Send ideas and suggestions to dees.stribling@bisnow.com.