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Spec in the Unlikeliest of Places?

Orange County

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Spec in the Unlikeliest of Places?
The Orange County industrial market has been a sleeping giant, knocked out cold for some years by the Great Recession. But the giant is waking up.
Spec in the Unlikeliest of Places?
Strength of the manufacturing sector, particularly aerospace- and bioscience-related companies, has Irvine-based Colliers International senior EVP Clyde Stauff excited. The demand for sites that will accommodate large distribution facilities is strong, and "the main constraint to development is a relative lack of available sites.” Still, developers have responded with spec industrial projects on sites they've managed to find after about seven years of none. Western Realco has two projects in North Orange County totaling about 290k SF, while Panattoni plans to break ground on the first phase of the 80-acre former Boeing campus in Anaheim, with about 626k SF.
Spec in the Unlikeliest of Places?
In its Q3 market report on Orange County industrial, Colliers notes positive net absorption of 377k SF for the quarter, and the total vacancy rate declined to 4.5% from 4.7%. A lack of Class-A buildings, the report adds, is keeping the market from recovering faster. But it's definitely recovering: Clyde cites the large areospace deals Colliers has done this year: a 105k SF corporate HQ with Goodrich, a 91k SF lease recently signed with B/E Aerospace in Fullerton, and a 83k SF building sale in Anaheim to Absolute Technologies.
Spec in the Unlikeliest of Places?
Voit SVP Michael Hartel, also based in Irvine, has seen an increase in investor competition in Orange County as the inventory of large industrial properties on the market decreases. It's put upward pressure on pricing and downward pressure on cap rates.
Spec in the Unlikeliest of Places?
We had Felix Baumgartner snap this pic during his jump from space last week. Local players backed by institutional money have the edge, Michael says. Expert local knowledge is important in any real estate transaction, but especially so in OC’s current climate. “Those institutional investors who are partnering with local experts to acquire properties are making deals.” He points to Penwood Real Estate Investment Management’s recent acquisition of the 345k SF 1683 Sunflower Ave in Costa Mesa (pictured). Michael and his colleague Mitch Zehner not only repped Penwood but also helped the buyer identify the property as a value-add opportunity.