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22 ORANGE COUNTY BUSINESS JOURNAL www.ocbj.com JANUARY 22, 2018

1.3% Vacancies Here Bode Well for Sellers

Tight Industrial Market Gets High Prices, New NamesBy MARK MUELLER

Orange County’s ultra-tight industrial sec-tor is resulting in record-breaking sale pricesfor the few buildings being added to the localmarket, and is apparently drawing more realestate investors and developers to the area.The latest eye-opening deal came in Fuller-

ton, where a new warehouse sold for whatbrokers described as a record-high comp foran owner-user deal in North OC.San Clemente-based Big Deltivity LLC,

which is affiliated with stand-up paddleboardmaker and distributor Riviera Paddlesurf,recently closed on the purchase of 4150 WestPalm St. just off Imperial Highway and aboutthree miles west of the Orange (57) Freeway.The 181,069-square-foot building traded

hands for $32.5 million, or about $180 persquare foot.The buyer will shift to the new property

manufacturing and warehouse operations ofan apparel affiliate it operates in Whittier,where it had leased space, according to DaumCommercial Executive Vice President CaseyMungo, who represented the buyers.The family-owned firm, which makes a va-

riety of stand-up paddleboards, accessoriesand apparel, will maintain its headquarters inSan Clemente, where it also owns a smallerindustrial property, Mungo said.“It was an opportunity for the buyer to ob-

tain a class A building in a class A market,said Mungo, who works at Daum’s Gardenaoffice.The sales price is among the highest per

square foot of the past 10 years for a North

4150 W. Palm: Fullerton property recently sold for $32.5 million, what brokers call record compfor North OC owner-user dealOC industrial building larger than 150,000square feet, according to records of markettracker CoStar Group Inc.The few area industrial properties that sold

at higher prices also involved new buildingsbut were largely occupied and were sold toinvestors rather than owner-users, at the Ana-heim Concourse development a few milesaway, records show. Those Anaheim buildings went for $188 to

$195 per square foot in 2016 and 2017.Big Deltivity’s purchase “demonstrates

owner-occupiers are well capitalized to pur-chase properties at prices high enough tocompete with investors,” noted a recent mar-ket report by the local office of brokerageJLL.Sales prices for OC industrial buildings are

generally up about 12% year-over-year, whilerents are up by more than 6%, according to areview of local brokerage data.From an owner’s perspective, North OC’s

industrial market can’t be much better, notedbrokers with CBRE Group Inc. who repre-sented the seller of the Fullerton property,

Newport Beach-based Western Realco.North OC “is one of the strongest and tight-

est industrial markets in the country, in partdue to its proximity to the Long Beach andLos Angeles ports. The area is a mature, fullydeveloped, land-scarce market with fewlarge-scale development opportunities,”CBRE said in a statement.The county’s 230-million-square-foot in-

dustrial base has a 1.3% vacancy rate, arecord low, according to CBRE.Rents at high-end industrial buildings are

up more than 50% since 2010, and projec-tions show more increases this year, largelydue to increased demand from e-commerce-related tenants, according to recent brokeragedata from Cushman & Wakefield Inc.Monthly industrial rents average nearly 90cents per square foot.

Beckman BeaconThe sale to Big Deltivity marks another no-

table transaction for Western Realco, one ofthe most active industrial property builders inOC since the recession.

It and financial partner AEW CapitalManagement in Los Angeles bought thenearly 8-acre West Palm Street site about twoyears ago from Irvine-based LBA Realty fora reported $11.8 million. At the time, the site held an older 89,000-

square-foot building that was razed to makeway for the new warehouse, which featuresabout 7,000 square feet of offices, 17 dockdoors, and a large, fenced truck court. “They were confident in the high demand

for industrial space in the region,” saidCBRE’s Sean Ward, who worked on the dealwith colleagues Ben Seybold and KeithGreer.The sale and high per-square-foot price also

bode well for the developer as it works on alarger, high-profile industrial development afew blocks away. Last summer it brokeground on its largest-ever local project, amultibuilding business park on Fullerton landpreviously home to Beckman Coulter Inc.’sheadquarters.The 44-acre site, vacant except for a mid-

sized office that will be redeveloped, is beingturned into an eight-building project calledBeckman Business Center totaling nearly amillion square feet.It’s the largest industrial project start in OC

in about four years, and its first buildingsshould be completed this summer, rangingfrom 42,000 square feet to 309,000 squarefeet, both for sale and for lease.

Office to IndustrialOther developers with little local industrial

presence appear to be taking notice at whatinvestors and tenants will pay for upgradedarea facilities.The local office of Houston-based Hines

� Industrial 36

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1Newport Beach$176.5 millionClose Date: Oct. 11Buyer: Goldman Sachs, HinesBuyer Rep: N/ASeller: Hines, OaktreeSeller Rep: Eastdil Secured LLC

4000 MacArthur Blvd.

3Mission Viejo$32.4 millionClose Date: Nov. 6Buyer: Combined Investments LLCBuyer Rep: Marcus & MillichapSeller: Flinn WestSeller Rep: JLL

26161 La Paz Road 4Anaheim$27 millionClose Date: Oct. 13Buyer: Hines, OaktreeBuyer Rep: N/ASeller: Pacific Sunwear ofCalifornia Inc.Seller Rep: NewmarkKnight Frank

3450 E.Miraloma Ave. 5

Laguna Hills$19.9 millionClose Date: Oct. 18Buyer: Meridian Property Co.Buyer Rep: Colliers InternationalSeller: Birtcher AndersonRealty LLCSeller Rep: Colliers International

24022 Calle dela Plata 6

Irvine$17.9 millionClose Date: Nov. 14Buyer: Koll Co.Buyer Rep: N/ASeller: Irvine Co.Seller Rep: NewmarkKnight Frank

17748 Sky Park Circle

7Newport Beach$17.2 millionClose Date: Oct. 31Buyer: Bergener MirejovskyBuyer Rep: N/ASeller: Burnham Ward PropertiesSeller Rep: N/A

4220 Von Karman Ave. 8Laguna Hills$15.9 millionClose Date: Oct. 3Buyer: Laurus Corp.Buyer Rep: N/ASeller: True NorthManagement GroupSeller Rep: HFF

24012 Calle dela Plata 9

Santa Ana$8.6 millionClose Date: Nov. 15Buyer: Veros Credit LLCBuyer Rep: N/ASeller: Broadway Partners GPSeller Rep: N/A

2333 N. Broadway 10Santa Ana$7.6 millionClose Date: Oct. 17Buyer: Jon AlberonBuyer Rep: Daum CommercialReal Estate ServicesSeller: TRISTAR Risk ManagementSeller Rep: RE/MAXEstate Properties

203 N. GoldenCircle Drive

2Orange$92.5 millionClose Date: Nov. 7Buyer: Lincoln Property Co.Buyer Rep: N/ASeller: Starwood Capital GroupSeller Rep: Newmark Knight Frank

500 N. State College Blvd.

Largest OCtransactions in Q4OFFICE SALES Data provided by:

01.22.18 SR_ComReUpd8_Layout 1 1/18/18 12:25 PM Page 24


1Irvine184,886 square feetTerm: N/ALandlord Rep: Irvine Co.Landlord: Irvine Co.Tenant Rep: Hughes MarinoTenant: Vyaire Medical Inc.

510, 520 Technology Drive

3Irvine63,879 square feetTerm: N/ALandlord Rep: CBRE Group Inc.Landlord: Trammell Crow Co.Tenant Rep: N/ATenant: Pathway Capital

18565-18575Jamboree Road 4

Irvine54,408 square feetTerm: N/ALandlord Rep: Irvine Co.Landlord: Irvine Co.Tenant Rep: N/ATenant: American Advisors

18200 VonKarman Ave. 5

Orange43,295 square feetTerm: N/ALandlord Rep: ColliersInternationalLandlord: Boyd WattersonAsset ManagementTenant Rep: N/ATenant: N/A

4000Metropolitan Drive 6

Irvine43,068 square feetTerm: N/ALandlord Rep: Irvine Co.Landlord: Irvine Co.Tenant Rep: N/ATenant: Squar Milner

18500 VonKarman Ave.

7Costa Mesa39,053 square feetTerm: N/ALandlord Rep: Irvine Co.Landlord: Irvine Co.Tenant Rep: N/ATenant: WeWork

3200 ParkCenter Drive 8

Irvine31,187 square feetTerm: 11 yearsLandlord Rep: JLLLandlord: HinesTenant Rep: N/ATenant: Xponential Fitness

17877 VonKarman Ave. 9

Aliso Viejo28,719 square feetTerm: N/ALandlord Rep: StreamRealty PartnersLandlord: RREEFManagement LLCTenant Rep: N/ATenant: N/A

85 Enterprise 10Buena Park26,593 square feetTerm: N/ALandlord Rep: SunnyHills-PalladiumLandlord: Sunny HillsManagement Co.Tenant Rep: Mohr PartnersTenant: Sunwest Mortgage

6131Orangethorpe Ave.

2Anaheim180,000 square feetTerm: 15 yearsLandlord Rep: DirectLandlord: Hines/Oaktree CapitalTenant Rep: DirectTenant: Pacific Sunwear of California Inc.

3450 E. Miraloma Ave.

Largest OCdeals in Q4OFFICE LEASES Data provided by:


JANUARY 22, 2018 www.ocbj.com ORANGE COUNTY BUSINESS JOURNAL 27



1Irvine287,726 square feetCompletion Date: JanuaryDeveloper: DPR Construction Inc.Leasing Company: CBRE Group Inc.Owner: Five Point Holdings

15101 Alton Parkway

3Tustin145,400 square feetCompletion Date: July Developer: Lincoln Property Co.Leasing Company: CBRE GroupOwner: Lincoln Property/Alcion Ventures

Barranca Parkway &Armstrong Ave. 4

Irvine105,643 square feetCompletion Date: June Developer: Irvine Co.Leasing Company: Irvine Co.Owner: Irvine Co.

500 Technology Drive 4Irvine105,643 square feetCompletion Date: June Developer: Irvine Co.Leasing Company: Irvine Co.Owner: Irvine Co.

520 Technology Drive 6Tustin92,916 square feetCompletion Date: July Developer: Lincoln Property Leasing Company: CBRE GroupOwner: Lincoln Property/Alcion Ventures

Barranca Parkway &Armstrong Ave.

7Tustin89,500 square feetCompletion Date: July Developer: Lincoln Property Leasing Company: CBRE GroupOwner: Lincoln Property/Alcion Ventures


Tustin89,468 square feetCompletion Date: July Developer: Lincoln Property Leasing Company: CBRE GroupOwner: Lincoln Property/Alcion Ventures


Irvine79,243 square feetCompletion Date: June 2018Developer: Irvine Co.Leasing Company: Irvine Co.Owner: Irvine Co.

510 Technology Drive 10Irvine74,426 square feetCompletion Date: June 2018Developer: Irvine Co.Leasing Company: Irvine Co.Owner: Irvine Co.

530Technology Drive

2Irvine189,500 square feetCompletion Date: January Developer: DPR ConstructionLeasing Company: CBRE Group Inc.Owner: Five Point Holdings

15131 Alton Parkway

Largest OCprojects in Q4OFFICE CONSTRUCTION Data provided by:



1Costa Mesa$64.8 millionClose Date: Nov. 15Buyer: SteelWave Inc.Buyer Rep: N/ASeller: Tribune Media Co.,Kearny Real EstateSeller Rep: Cushman & Wakefield

1350 S. Coast Drive

3Rancho Santa Margarita$16.5 millionClose Date: Oct. 2Buyer: Applied MedicalResources Corp.Buyer Rep: Lee & AssociatesCommercial Real Estate ServicesSeller: MagnaFlowSeller Rep: Lee & Associates

30142 Avenida DeLas Banderas 4

Anaheim$14.6 millionClose Date: Oct. 13Buyer: Pacific IndustrialBuyer Rep: Voit RealEstate ServicesSeller: Cathedral Centerof St. PaulSeller Rep: N/A

2225 E. Katella Ave. 5Costa Mesa$9.2 millionClose Date: Oct. 24Buyer: 2970 Airway LLCBuyer Rep: N/ASeller: Lakeshore Enterprises LPSeller Rep: N/A

2970 Airway Ave. 6Tustin$8.4 millionClose Date: Oct. 10Buyer: Hao ZhuangBuyer Rep: JLLSeller: LBA RealtySeller Rep: Lee & Associates

14831 Franklin Ave.

7Buena Park$6.2 millionClose Date: Oct. 25Buyer: Ohana 9 LPBuyer Rep: GM Properties Inc.Seller: McLellan Estate Co.Seller Rep: GM Properties

8521-8581 Roland St. 8Costa Mesa$5.9 millionClose Date: Nov. 1Buyer: J.L. Moseley Co.Buyer Rep: N/ASeller: Prism Realty Corp.Seller Rep: N/A

3101 Red Hill Ave. 9Orange$5.7 millionClose Date: Oct. 31Buyer: Viele & Sons Inc.Buyer Rep: N/ASeller: B & B Mill SalesSeller Rep: Lee & Associates

1700 N. Main St. 10Santa Ana$5.5 millionClose Date: Nov. 28Buyer: All American Racers Inc.Buyer Rep: N/ASeller: S & J Transportation/SRM TransportSeller Rep: N/A

2501 S.Garnsey St.

2Irvine$28.5 millionClose Date: Oct. 31Buyer: Intracorp Cos.Buyer Rep: N/ASeller: Greenlaw PartnersSeller Rep: Tierra Development Advisors

17822 Gillette Ave.

Largest OCtransactions in Q4INDUSTRIAL SALES Data provided by:



1Garden Grove207,953 square feetTerm: 125 monthsLandlord Rep: Voit Real EstateServices/Colliers InternationalLandlord: Rexford IndustrialTenant Rep: Savills StudleyTenant: Southland Industries

12131 Western Ave.

3Fullerton127,375 square feetTerm: Five yearsLandlord Rep: TranswesternProperty ManagementLandlord: RREEF Management LLCTenant Rep: DirectTenant: CJ Foods

675-679 S.Placentia Ave. 4

Huntington Beach84,754 square feetTerm: N/ALandlord Rep: CBRE GroupLandlord: Sares-Regis GroupTenant Rep: N/ATenant: Titan Footwear LLC

15342 Graham St. 5Irvine77,313 square feetTerm: 120 monthsLandlord Rep: CBRE GroupLandlord: BLT EnterprisesTenant Rep: N/ATenant: NN Inc.

9700 Toledo Way 6Anaheim 53,562 square feetTerm: N/ALandlord Rep: DAUM CommercialReal Estate ServicesLandlord: Calton Corp.Tenant Rep: Lee & AssociatesCommercial Real Estate ServicesTenant: Smartex

5455 E. La Palma

7Anaheim49,813 square feetTerm: One yearLandlord Rep: CBRE GroupLandlord: Narendra GuptaTenant Rep: N/ATenant: N/A

900-912 E.Arlee Place 8

Orange49,515 square feetTerm: N/ALandlord Rep: Voit RealEstate Services Landlord: Kodash Inc.Tenant Rep: N/ATenant: Securitybase.com

337 W. Freedom Ave. 9Foothill Ranch45,190 square feetTerm: One yearLandlord Rep: CBRE GroupLandlord: DCT Industrial Trust Inc.Tenant Rep: N/ATenant: A & J Manufacturing Co.

70 Icon 10Anaheim44,395 square feetTerm: N/ALandlord Rep: Cushman& WakefieldLandlord: Larry BedrosianTenant Rep: N/ATenant: Direct Edge Media

2890-2900 E.White Star Ave.

2Anaheim128,372 square feetTerm: One yearLandlord Rep: CBRE Group Inc.Landlord: The Carson CompaniesTenant Rep: N/ATenant: N/A

1765 Penhall Way

Largest OCdeals in Q4INDUSTRIAL LEASES Data provided by:



Largest OC projects in Q4

INDUSTRIAL CONSTRUCTIONData provided by:

1Fullerton309,439 square feetCompletion Date: May Developer: Western RealcoLeasing Company: Voit RealEstate ServicesOwner: Western Realco

210 E. Lambert Road

2Fullerton212,202 square feetCompletion Date: MayDeveloper: Western RealcoLeasing Company: Voit RealEstate ServicesOwner: Western Realco

4278 N. Harbor Blvd.

3Anaheim170,000 square feetCompletion Date: February Developer: Batcheller Equities/Panattoni DevelopmentLeasing Company: NewmarkKnight FrankOwner: Batcheller Equities/Panattoni Development

1701 S. Anaheim Way 4Fullerton105,322 square feetCompletion Date: May Developer: Western RealcoLeasing Company: Voit RealEstate ServicesOwner: Western Realco

4250 N. Harbor Blvd.

5Fullerton78,523 square feetCompletion Date: May Developer: Western RealcoLeasing Company: Voit RealEstate ServicesOwner: Western Realco

4320 N. Harbor Blvd. 6Fullerton45,761 square feetCompletion Date: May Developer: Western RealcoLeasing Company: Voit RealEstate ServicesOwner: Western Realco

110 E. Lambert Road

7Fullerton41,891 square feetCompletion Date: May Developer: Western RealcoLeasing Company: Voit Real Estate ServicesOwner: Western Realco

150 E. Lambert Road



this month announced its largest-ever indus-trial property acquisition in OC, for a414,309-square-foot building on East DyerRoad in Santa Ana.The vacant property a few blocks from theCosta Mesa (55) Freeway was previouslyused by Irvine-based carpet manufacturerRoyalty Carpets, which closed last year.Hines paid $57 million, or about $138 persquare foot, for the 64-year-old property, ac-cording to CoStar records.That’s an uptick in pricing compared to thelast big older, vacant industrial property thatsold in OC: the 1.1-million-square-foot formerJ.C. Penney distribution center in Buena Park,which sold last year for roughly $126 persquare foot to CenterPoint Properties in Oak-brook, Ill. The $131 million deal, which closedin April, also effectively marked CenterPoint’sentry into the area’s industrial market.Hines’ purchase of the 515 E. Dyer propertyoffers “strong visibility, flexibility, and scale

Uptick: old Royalty Carpets facility brought more per square foot than last big older vacant in-dustrial property that sold in county, in Buena Park

Industrial� from page 22

Includes single- and multitenant buildings and parks of 30,000 square feet or larger, excluding government and medical buildings. Lease rates are full-service gross, per square foot, per month, excluding any freerent, tenant improvements and other concessions and weighted by available square feet.

No. ofProjects

Net RentableArea

TotalVacant SF

SF AbsorbedQ4

SF AbsorbedYTD

Average Asking RentFigures are for Q4 Vacancy Rates

Q4 Q3 Q42016

Q4 Q3 Q42016

North Orange County 124 8,536,361 783,833 66,712 55,361 $2.39 $2.31 $2.24 9.2% 10% 9.8%

Central Orange County 283 16,515,649 1,871,007 42,274 (2,564) $2.28 $2.25 $2.15 11.3% 11.6% 11.3%

West Orange County 86 4,814,781 479,949 56,341 123,211 $2.36 $2.25 $2.09 10% 11.1% 12.5%

Airport/Coastal Area 680 48,995,550 6,009,816 (594,212) (262,167) $3.13 $3.09 $2.83 12.3% 10.1% 10.8%

South Orange County 671 25,029,336 2,173,070 560,283 1,231,366 $3.08 $3.01 $2.58 8.7% 7.1% 6.6%

Orange County Totals 1,844 103,891,677 11,317,675 131,398 1,145,207 $2.88 $2.82 $2.60 10.9% 9.7% 9.9%

O F F I C E S P A C E

Office Rental Rates Rise With Demand in Q4Orange County lease rates increased six centsin the fourth quarter to $2.88, in large part dueto product coming online while not oversaturat-ing the market. Demand remains strong andcontinues to keep up with supply.The average asking rental rate rose 2.1% fromthe third quarter and 10.8% since the start of theyear. Large blocks of space were hard to find, sothere was high demand from smaller tenants.The workplace has shifted, and space needshave decreased 10% to 15%.Rent increases are a result of new and reno-vated class A and B product coming to market.Cash flow buyers/owners are currently focusedon high occupancy levels, offering lower askingrates with little to no free rent. Investors, lookingto sell in three to five years, are increasing ask-ing rates and offering larger amounts of free rent.North and West OC asking rates had the high-est increases in the quarter as those areas re-

mained the tightest; vacancy rates were 9.2%and 10%, respectively. Space was scarce, andleasing activity remained low. South OC ratesincreased despite the increasing 1.6% vacancyin Aliso Viejo as completions drove up rents.Rents are projected to continue going up, thoughat a slower rate.Net absorption in the quarter was positive131,398 square feet. It was positive but low inNorth, West and Central OC, with many smallmove-ins and move-outs. Large negative absorp-tion in the Greater Airport Area was due to Broad-comvacating 740,000 square feet as it downsizedand moved to Five Point Gateway in the IrvineSpectrum in South OC. That left a 740,000-square-foot dent in the airport area and an 80,000-square-foot dent in the countywide market.Strong leasing activity and move-ins in theairport area have offset Broadcom’s move.There were no other dramatic expansions or

contractions in the market in the quarter.Aliso Viejo took a hit when QLogic movedout 146,000 square feet. The Irvine Spectrumgained the most positive absorption with Broad-com, Lennar Corp. and FivePointmoving intoFive Point Gateway. South OC performed wellduring the quarter due to Vyaire Medical leas-ing 184,000 square feet and other large tenantsmoving into the market.The long-anticipated 1.1-million-square-footFive Point Gateway was completed with 72%of the office park preleased. Lennar and Five-Point leased 90,000 square feet and 45,000square feet, respectively. With a large amount ofthe project preleased, vacancy in Irvine Spec-trum increased by 2.3%. The old 2722 Michel-son industrial building is being converted to acreative-office/R&D building, delivering155,000 square feet by the end of this year. TheBoardwalk was finished, bringing 537,000

square feet to the airport area. Currently signedare Pathway Capital and Propel Media at64,000 square feet and 13,000 square feet, re-spectively. The Boardwalk was 18% preleasedat the time of completion.A total of 2.5 million square feet of officespace came online last year in the airport areaand South OC. There are 982,000 square feetunder construction in the county, 612,000 of thatprojected to be finished in the airport area and370,000 in South OC due to the Flight, the Quadand the conversion of 2722 Michelson into cre-ative-office space.North OC hasn’t had new construction sincethe first quarter of 2016. Central and West OClast had construction in the third quarter of 2013,but we can expect new projects to pop up inthose areas.

—Analysis by CBRE Research

in a highly desirable, 1%-vacant OrangeCounty industrial market where this producttype is largely being torn down for multifam-ily development,” the company said in astatement. The buyer also pointed out that the facilityrepresents “one of the few substantial blocksof industrial vacancy on the market today.”It said it’s begun “a robust capital improve-ment plan” for the building, which includesa new roof, seismic retrofit, expanded trailerparking, office upgrades, landscaping andsignage. The deal offers “a great opportunity toplant an industrial flag for Hines in SouthernCalifornia,” said the developer, which hasmade its mark in OC the past decade throughthe purchase of numerous office propertiesacross the region.Hines said it’s scouting other area indus-trial deals.“We look forward to aggressively pursuingindustrial deals of all types, including devel-opment, urban infill, sale leasebacks, etc.,”said Hines Senior Managing Partner RayLawler. �



Includes competitive single- and multitenant manufacturing and research and development buildings 10,000 square feet or larger. Total available includes space under construction. Net absorption figures areactually net activity, i.e., the change in the amount of vacant square feet from one period to the next. Lease rates are triple-net per square foot, per month, excluding any free rent, tenant improvements and otherconcessions and weighted by available square feet.

No. ofProjects

TotalBuilding SF

TotalVacant SF

SF SoldQ4

SF LeasedQ4

Total GrossActivity

Total NetAbsorption

Average Asking RentFigures are for Q4 Vacancy Rates

Q4 Q3 Q42016

Q4 Q3 Q42016

North Orange County 2,770 113,096,401 1,191,733 63,075 402,968 466,043 (265,351) $0.87 $0.87 $0.73 1.1% 0.9% 1.2%

West Orange County 1,108 41,446,128 348,541 14,000 498,994 512,994 (132,419) $0.83 $0.81 $0.75 0.8% 0.6% 0.4%

Airport/Coastal Area 2,012 67,340,565 2,037,433 97,816 256,413 354,229 (852,108) $0.82 $0.83 $0.86 3% 2.7% 1.8%

South Orange County 963 33,640,570 754,905 124,051 359,141 483,192 (171,502) $1.08 $1.03 $0.96 2.2% 1.7% 2.5%

Orange County Totals 6,853 255,523,664 4,332,612 298,942 1,517,516 1,816,458 (1,421,380) $0.88 $0.87 $0.84 1.7% 1.4% 1.4%

I N D U S T R I A L S P A C E

Despite Poor Second Half, Industrial Market Still TightThe county’s industrial market hit a somewhatsour note in the final act, a disappointing devel-opment following a stellar first half of 2017.The root cause can be traced back to not one,but a series of poorly timed events and demol-ished buildings over the last six months of theyear. But that shouldn’t be taken as a sign of badthings to come; the market is still tremendouslytight on available space, and gross activity re-mained on par with past years.Even with some late-cycle caution, the marketremained in the landlord’s favor, with constantdemand and a shrinking base.Moving into this year, the market will have anew chance to shine, as occupancy gains andrental growth are projected to best 2017 results.Lease rates at the end of the quarter closed at88 cents per square foot, up 1 cent from the thirdquarter. Year-over-year, lease rates rose 4.8%due to an imbalance between available supplyand demand. The lack of class A product caused

class B product lease rates to increase signifi-cantly during the year. Steady demand and con-stricted supply prompted most landlords to offerfewer incentives due to high competition amongtenants, so they offered concessions at their owndiscretion.Given market conditions shouldn’t changemuch this year, we predict lease rates will grow

7.3% by year-end.Average asking sale prices continued goingup, ending the quarter at $202.94 per squarefoot, up 5.1% year-over-year, despite a slowergrowth rate during the second half of the year.They’re projected to grow this year, as purchas-ing opportunities will be limited.Lack of available supply curbed occupancy

gains down the stretch for the year, closing thequarter and the year with negative net absorptiondue to the shrinking base.Four buildings were demolished, accountingfor over 600,000 square feet in the quarter. Ac-tivity by third-party logistics, e-commerce, en-gineering firms and medical manufacturingcompanies helped limit occupancy losses for theyear. For example, engineering firm SouthlandIndustries made a big splash in West OrangeCounty, expanding into a 200,000-square-footbuilding in Garden Grove.The growing need for medical productsprompted Applied Medical to buy anothermanufacturing facility, increasing its footprint inthe region. Despite the setback in net absorption,we predict the industrial market will bounceback strong, as net absorption is projected to bepositive this year.

—Analysis by CBRE Research

7390 Lincoln: Southland Industries expanded into Garden Grove building


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