Orange County Industrial Best Since 2007

I provide location advice to owners and occupants of industrial buildings in Southern California. My friend and colleague Art Barrett of Art Barrett and Associatates penned this recap of the Orange County, California industrial market. Art's recap has the market stabilizing at 6.5% vacancy. Many in our industry have felt the surge in activity since the doldrums of 2008 and 2009. You can read the entire recap below.

Overview:

After a steady three-year decline, the Orange County, California industrial market appears finally to have stabilized. The fourth quarter closed out 2010 showing healthy net absorption – the third straight quarter with absorption in the plus column.

The last year with three quarters of positive absorption was 2006. The Q4 reduction of 428,916 sq. ft. of available space was the most since Q2 2007.

The year-end vacancy rate settled at 6.5%, down 0.1% from its Q2 peak and less than its 7.6% 10-year high in 2002. Total available space finished the year at 10.5%, a full percentage point less than Q1 which was the last of 13 straight quarters of increasing availability. During that time, 8.5 million sq. ft. of industrial users scaled back or shuttered their businesses.

In early 2010, improvement in the industrial market still seemed far on the horizon. But following a dismal Q1 in which tenants vacated more than 1 million sq. ft., absorption turned positive in Q2. After Lee & Associates’ previous Q3 report on buildings larger than 10,000 sq. ft. went to press, the data was adjusted. The reconciled totals showed 220,669 sq. ft. of positive absorption in Q3. The trend gained strength in Q4.

All told, the 18 million sq. ft. leased in 2010 was the most since 2004.

The year-end data is more evidence that confidence in the economy is returning. Unemployment has leveled off and economists at Chapman University and Cal State Fullerton forecast modest Orange County job growth in 2011.

Storm clouds on the horizon:

Lee & Associates industrial specialists, however, believe perhaps a record volume of so-called “blend and extend” leases of existing tenants since 2008 may dampen absorption particularly of large buildings for the next few years until the extended leases run their terms. Small users who signed early renewals in multi-tenant buildings, however, have greater flexibility with a landlord to expand within their project.

However, despite the seeming high rate of vacancies many available small and mid-size buildings are obsolete and poorly located, limiting choices for ideal facilities.

Four of the county’s five industrial markets improved in 2010:



--The Airport market, with 25% of Orange County’s 294-million sq.-ft. industrial base, was the top performer in Q4 with 397,214 sq. ft. coming out of available inventory. Its vacancy rate fell 0.5% to 7.3%.

--Absorption in North County – the largest market with about 85 million sq. ft. – was down for the year but only slightly and closed with a 6.1% vacancy rate.

--Central County finished the year with absorption in the black for the year, posting three straight quarters of absorption gains and ending 2010 with vacancy at 5.8% or 3.8 million sq. ft.

--West County’s 24.4 million sq. ft. of space was 4.9% vacant, a 0.9% improvement over 2009.

--Still struggling is the South County with 44.8 million sq. ft. and vacancy at 8% -- up 0.4% for the year.

Market Forecast:


Even though lease rates haven’t quite leveled off – with asking rents plunging 29% since March 2008 and 12% last year – the deals of 2009 for quality space are gone. The market for available buildings for sale also is expected to tighten.

Saving 50 manufacturing jobs in Orange County

I provide location advice to owners and occupants of industrial buildings in Southern California. Jan Norman of the Orange County Register recently wrote about one of our clients, IAC Industries in Brea, California. IAC has been in Brea for over 20 years and was seriously contemplating moving to Colorado Springs and taking over 50 high paying manufacturing jobs along with them. You can read the article by clicking here.

We are pleased to report that IAC will be staying in California as we negotiated a lease extension for the company. IAC's landlord was very compliant in renewing IAC and made the decision that to replace the tenant was more costly than reducing their rent an avoiding the costs of originating a new lease.

Orange County, California receiving out of state companies

I provide location advice to owners and occupants of industrial buildings in Southern California. Jan Norman of the Orange County Register recently wrote about several out of state firms that have moved into Orange County, California. I was fortunate to have provided advice to one such company, Drake Controls from Houston Texas. The article was featured on Saturday January 15, 2011 and you can read the entire article by clicking here.

A National Industrial Market Review by Region

I provide location advice to owners and occupants of industrial buildings in Southern California. My friend and colleague, Duke Long asked me to participate in a recent podcast which reviews, by market, the industrial activity currently and our predictions for the next few months. I was flattered to be asked and was surrounded by a great deal of talent. You can listen to the entire podcast by clicking here.

Some of the participants and highlights:


What’s happening on-the-ground in the Industrial lease market? Mike Manning of LoopNet and Duke Long of the Duke Long Agency, gathered industrial brokers from Orlando, Chicago, Detroit, Houston, New Jersey and Los Angeles to find out what is happening in their markets. What are the factors that are driving asking rents? What is happening to supply?

Read excerpts of the podcast script below or listen to their ‘in-the-trenches’ perspective.



Overview of LoopNet’s Marketplace Activity

MIKE MANNING: What we’re seeing overall in the LoopNet marketplace in the industrial lease sector is price declines more or less across the board, but with some differences across the market. So we’re seeing our sharpest price declines in Phoenix, San Antonio, Orlando and Miami which are down 8-9% versus the prior year November in terms of average asking price per square foot, whereas on the other end of the spectrum Chicago is holding flat, is actually up slightly, and Philadelphia is close to flat along with Atlanta and Houston. So I will be curious to hear about the differences in perspective from the brokers on the call as to what’s going on in their markets and what’s accounting for the different levels of pricing pressure that they are seeing.

We’re also seeing differences in the change of supply and demand in the market across different geographies, with Houston showing up as having a fairly sharp decline in supply although an increase in demand. However, I think that’s different from John’s experience personally, and so I’m going to be interested in hearing about that. New York is also showing some declines in terms of demand but the supply is up, whereas at the other end of the spectrum Detroit, Orlando and Philadelphia are all seeing significant increases in demand which we’re measuring by search activity on the site.

2011 will be THE year for Social Media and Small Business

I provide location advice for owners and occupants of industrial buildings in Southern California. I have used social media as a marketing tool since the middle of 2008. Several early adopters have blazed the SMM trail but it appears as though social media will "take hold" this year and become a main stream medium according to this Fox News post and Russell Rothstein.

"This year (2010) was a learning curve year for small businesses delving into social networks, but next year will mark an increased push into that realm, according to a survey by SaleSpider, the small- and medium-sized business social network. In the past, social networking had always been about social and now it's increasingly about business networking," said Russell Rothstein, CEO of SaleSpider. "Small businesses are going to spend more and more time on social networking." According to SaleSpider, which polled 384 small and medium business owners, 75 percent plan to make social networking a larger part of their marketing mix in 2011, while two-thirds said social networking has already served to boost sales and revenue. The survey also found that nearly half of the small businesses that reported social networks have already boosted sales are using social networking in multiple business development and sales capacities including identifying requests for proposals, networking with new and existing customers, and promoting their own business. In fact, 40 percent of the small businesses that think social networking is boosting sales said the sales increase was "significant." The big trend is all about doing business on the social networks," said Rothstein, noting small business owners aren't going to use social networks to post what they are doing on a personal level. He said small business owners plan to use social networks as a venue to network, as well as a lead generator for new business. While an increased push into social networking doesn't mean small business owners are going to open their purse strings, it does mean that small business owners will dedicate more time to their social networking strategy, said Rothstein. "Social networking is not a costly pursuit, it's a time purist," he said. According to Rothstein, small business owners don't have to spend their entire day online. He said social networking efforts can be done during the work day in small intervals, and that small business owners only need to spend about twenty hours a month on it. Indeed, 83 percent of survey respondents said they will devote 11 percent or more of their marketing resources on social networking in the New Year.

Mobile Apps to get more interest:

With smart phones proliferating and new tablet devices like the iPad gaining in popularity, it's not surprising that next year will mark an increased focus on mobile social networking by small businesses, according to SaleSpider. The survey found that 53 percent of respondents are using or plan to use social networking sites from their mobile devices via a mobile app. In addition to using a mobile app to access social networks, small business owners are expected to increase their usage of mobile apps that help run their business whether it's an app to manage contracts or an app to input sales data on the go.

More education needed:

Social networking will be a main focus for small businesses in 2011, but it doesn't mean that more education isn't needed. People know how to use a social network, but Rothstein said they may not know how to use it effectively to boost their business. He said small business owners should avoid engaging in social networks from a personal perspective and keep the profile and pictures professional. At the end of the day, Rothstein said, small business owners just have to take the leap. "Engage. Everyone is jumping into it, so you might as well jump into it," said Rothstein."

Top Issues for California Businesses in 2011

I provide location advice for owners and occupants of industrial buildings in Southern California. Jan Norman of the Orange County Resgister recounts the top issues for Orange County Businesses this year. You can read the entire article by clicking here.