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We’ve
been blessed with five grandchildren - two of whom live within walking distance.
We see them often. It’s AWESOME! Our oldest is obsessed with the history of the
Titanic. Go figure. Suffice to say we’ve become quite expert on the pitfalls of
icebergs. As yet another documentary was consumed last night - my thoughts
veered - sorry - to commercial real estate. Not the disaster part but the
iceberg part. You see, what’s happening currently with industrial real
estate is akin to those floating behemoths of frozen H2O - if you can’t see
below the surface - you’ll miss 80% of the market’s activity.
If
we take a look at north Orange County, California which includes the cities of
Anaheim, Placentia, Yorba Linda, Brea, Fullerton, Orange - and throw in East
Yorba Linda, AKA Corona - for good measure - you will find a startling lack of available
Class A buildings. And by Class A, I’m referring to those constructed since
2010. Many of these cities have ZERO availabilities above 100,000 square feet.
What’s special about Class A you may be wondering? Well, new inventory comes
equipped with several goodies - such as taller ceilings, more powerful fire
suppression, and greater truck access. Might I mention ALL of these goodies are
needed for the eCommerce occupants that stack and ship things. One of the
advantages enjoyed by the Inland Empire? There are still large swaths of land
to be developed into concrete monsters and the existing buildings are newer. So
what? Inland Empire lease rates are quickly surpassing those of North Orange
County - especially if it’s a Class A building in Ontario vs a Class C in
Anaheim. Occupants are paying for image and quality. So what if they drive a
hit farther. Their business run so much more efficiently.
So
how about what’s happening beneath the waves, so to speak? Developers are
voraciously gobbling campuses of industrial buildings formerly housing
manufacturing entities. We saw this begin around 2003 and continue with a
vengeance through 2008. Oops. Minor reset! Then commence again around 2014.
Panattoni Development’s re-tool of the Boeing campus in East Anaheim was
spectacular! A wonderful mix of quality manufacturing and logistics buildings
was delivered over several phases. Even Disney re-located their costume
operation to the project.
Beckman
in Fullerton must also be mentioned. If you’re ever in the neighborhood of
Harbor and Lambert - take a look. You’ll be impressed! Western Realco created a
masterful layout of logistics spaces which engendered great appeal and demand.
But
over the last six months - acquisition activity has been turbo-charged! A former
National Oilwell Varco site in Brea will soon house a gorgeous 108,000 square
foot development. Part of the former Mitsubishi holdings in Cypress will be
re-developed by scraping some existing buildings and leaving some more on the
22 acre parcel. Kimberly Clark’s operation - formerly located on Orangethorpe
in Fullerton could very soon be the home of your favorite warehouse operation.
Planned are several large boxes for that site. Finally, that location you pass
on the 91 Freeway - Universal Alloys? Yep. Slated for a new development.
The
landscape of available Class A inventory should change dramatically over the
next twelve months. It will be curious to see if any of the buildings actually
hit the market - or if they are simply pre-leased. I’m betting on the latter.