Vacancy Rate DOWN 2.04% 2.06% 2.35% (13.19%) Availability Rate UP 4.81% 4.63% 4.48% 7.37% Average Asking Lease Rate UP $0.87 $0.85 $

Transcription

1 OC Second Quarter MARKET REPORT Orange County Industrial MARKET OVERVIEW. The Orange County economy is expected to continue its upward trend through, with supply constraints and conversions from industrial to other property types playing key roles in tightening Orange County s fundamentals. Vacancies are low, demand is consistently strong, and it s still a landlord s market. Tenants looking for industrial space face one the tightest markets in the country, as growth in traditional import logistics and e commerce continues to drive strong demand. This consistent demand and a lack quality space have pushed asking rents higher. The Orange County industrial market continues to benefit from the rise e commerce as retailers strive to respond quickly to demand throughout Orange County. 7% VACANCY VS. AVERAGE ASKING LEASE RATE $.87 $1.5 $.9 $.75 VACANCY. The growth e commerce is also having a significant effect on the Orange County vacancy, creating a trend toward bigger and more efficient distribution centers. With vacancies currently in the range, the Orange County industrial market has one lowest rates in the nation for 2Q. Much what drives demand for industrial space is linked to the American consumer. The vacancy rate for industrial buildings fell to 2., down from an already low 2.3 this time last year. Expect vacancy rates to stay low as the limited and shrinking inventory quality buildings is quickly absorbed by a motivated pool tenants. LEASE RATES. Online sales continue to drive significant requirements for new industrial space across the country. An uptick in e commerce related leasing by 3PLs and healthy demand from other logistics and distribution occupiers are fueling rent growth. The average asking lease rate, which incorporates all size ranges and submarkets throughout Orange County, is $.87 NNN per square foot per month, a $.2 per square foot increase from last quarter and a $.6 per square foot increase from a year ago (7.4 annual increase). SALE PRICES. The Orange County industrial market s average asking price at the end 2Q came in at $27.25 per square foot (average price tracks 1, square foot buildings and larger). While sale prices vary greatly depending on the size the building and an average sale price doesn t tell the entire story, this represents an increase nearly 5.8% from 2Q 217. As interest rates move up, we expect to see more modest levels appreciation through the balance and into 219. With so little sizable inventory, most industrial transactions are for properties below 5, square feet and prices are well above the national average. TRANSACTION ACTIVITY. The effect supply constraints on this market cannot be overemphasized. With few developable sites, vacancies remain close to the lowest in the nation resulting in less than 6, square feet absorption year to date. Persistent industrial demand stemming from port activities, coupled with the difficulty bringing new industrial product to market, should ensure Orange County fundamentals remain among the strongest in the nation. Sale and lease activity checked in at roughly 3.5 million square feet for 2Q, a significant decrease from 2Q 217 s total 4.5 million square feet. % 18M 16M 14M 12M 1M 8M 6M 4M 2M M YTD VACANCY: Total Space Divided by Total Existing Inventory AVERAGE ASKING LEASE RATE: NNN / SF / Month 29 SALES TRANSACTION VOLUME & LEASES YTD $.6 $.45 $.3 $.15 $. 2,25 1,8 1,575 1,35 1, AVAILABILITY. The Orange County industrial availability rate (currently being marketed as available for lease) rose by.18% to 4.8 at the end the quarter, the highest availability rate in four years. However, the five year average in Orange County is 4.5, and we expect the availability to decline, causing a further increase in lease rates. Market Statistics Change Over Last Quarter 2Q 1Q 2Q 217 % Change Over Last Year DOWN (13.19%) UP % 7.37% Lease UP $.87 $.85 $ Sale Price UP $27.25 $ $ Sale & Lease Transactions DOWN 3,5,214 3,821,975 4,559,993 (23.2) DOWN 1,975,35 3,748,497 2,539,182 (22.2) POSITIVE 18, ,679 (54,349) N/A

2 OC Industrial LEASE RATES. Anticipate asking rents to increase by a minimum to reach a level $.89 per square foot by the end with more robust increases coming in Class A buildings with modern features, such as 3' warehouse clearance, ample dock high loading, fenced yards and immediate freeway access. Forecast VACANCY. will be a significant hurdle for tenants for the balance and reaction time will be critical. Off market deals will be, and arguably have already become, the norm and tenant concessions will be severely limited in this competitive market. With very little new product coming online and tenants electing to recommit or to renew in larger blocks space, expect vacancy rates to remain below through. OVERALL. The Orange County industrial market continues to benefit from the rise e commerce as retailers strive to meet demand quickly. The fact remains there is considerable pent up consumer and business demand in the economy, and this should continue for the foreseeable future. The Orange County industrial market has continued to strengthen and has created a great deal optimism for and beyond. The fundamentals for Orange County industrial continue to look strong during this period prolonged expansion. With limited new deliveries and no speculative excess, expect the supply and demand imbalance to remain, ultimately benefiting landlords. CONSTRUCTION. Western Realco is wrapping up the next significant campus in Orange County Beckman Business Center in Fullerton. Several buildings in this project will be able to house large users, and delivery is expected by the end this summer. Demand for high quality industrial space continues to increase throughout the region and developers work to deliver modern facilities for tenants. 4, square feet were delivered in the past 12 months, and nearly 1.3 million more square feet are currently under construction. Even though the market is craving new, Class A product, OC is running out industrial land. ABSORPTION. Positive momentum continued in 2Q, albeit at a slower pace. 2Q recorded 18,829 square feet positive absorption this quarter, compared to 54,349 square feet negative net absorptions during the same period last year. Orange County now has logged 4 consecutive quarters positive net absorption. New arrivals or expansions in 2Q include: Legacy Farms moving into 128,372 square feet at 1765 W. Penhall Way in Anaheim; L&W Supply Company moving into 73,4 square feet at 24 W. Fletcher Avenue in Orange; and NPL Construction moving into 58,22 square feet at Brea Industrial Complex. Significant Transactions 4M 3M 2M 1M M -1M -2M -3M -4M -5M NEW DELIVERIES & NET ABSORPTION VS. AVAILABILITY RATE NEW DELIVERIES: New Construction Delivered to the Market 4.8 NET ABSORPTION: Changes in the Amount Occupied Space from One Quarter to the Next YTD AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date 1 9% % % -1-1 Sales * Voit Real Estate Services Deal Property Address Submarket Sale Price Buyer Seller 5 Icon Foothill Ranch 37,781 $56,5, Prologis AEW Capital Management Airway Ave. 2 Properties Costa Mesa 157,24 $33,75, Pacific Industrial, LLC * 33 & 38 Airway, LLC 173 S. Anaheim Way Anaheim 143,93 $33,, American Realty Advisors Panattoni Development Cliffwood Park St. Brea 99,552 $16,127, LFT-Cliffwood, LLC SAME Investments, LLC 119 E. Stanford Ct. Anaheim 34,494 $6,8, Rexford Industrial Realty, LP * Jacqueline Sue Johnson Tr. * Leases * Voit Real Estate Services Deal Property Address Submarket Transaction Date Tenant Owner 74 Hazard Ave. Westminster 187,696 May- Lexor Clarion Partners 1585 MacArthur Blvd. Costa Mesa 1,233 Jun- Robinson Pharma Segerstrom 251 Raymer Ave. Fullerton 97,34 May- Dynamex Alere Property Group 3191 E. La Palma Ave. Anaheim 76,824 Apr- Brewery X * Calco, LLC 125 N. Miller St. Anaheim 74,313 Jun- Excelsior Nutrition* TH Real Estate* VOIT REAL ESTATE SERVICES 2

3 OC Industrial Lease Airport Area Costa Mesa 425 7,228,637 1,276 24, , % $1.3 $ (49,877) (57,332) 77, ,919 Fountain Valley 186 3,856,669 73,2 44, , $.92 $ (1,269) (3,779) 14,527 22,113 Irvine 39 11,849, , % 834, $.83 $ ,125 (65,687) 67,921 27,28 Newport Beach ,567 1, , $. $. 13,649 7,83 13,649 16,83 Santa Ana 1,575 29,886, , , ,449,3 4.8 $.84 $ (57,783) (36,622) 183, ,55 Tustin 112 4,317,84 1, 165, , $.73 $26.4 (24,166) (59,486) 159,9 2,418 Airport Area Total 2,656 57,725, ,167 1,478, ,95, $.85 $ (33,321) (215,823) 516,355 1,154,246 North County Anaheim 1,831 44,856,794 53,85 478, % 1,194, $.86 $ , , ,9 1,111,835 Brea 33 11,913,379 2, 235, % 349, $.76 $26.31 (26,429) 22,968 7, ,294 Buena Park ,133, ,754 18, ,188, $.83 $ (6,68) 235,78 53,9 362,634 Fullerton ,232, , , $.77 $ (154,88) (14,535) 49,932 48,775 La Habra 197 3,484,192 42, 7, ,579.7 $.79 $ ,867 26,267 19,355 33,76 Orange ,622,82 296, % 375, $.86 $ ,116 (39,552) 178, ,944 Placentia 218 4,59, ,54 54, ,7 2.4 $.75 $ (36,451) (1,29) 23,465 76,13 Yorba Linda ,941 25, , $. $285. (9,624) (1,1) 2,444 13,916 North County Total 4,39 11,295,686 1,367,18 42, 1,492, ,943, % $.81 $ , ,26 837,67 2,724,288 South County Aliso Viejo ,132.%.% $. $. 19,68 Foothill Ranch 68 3,552,19 94, % 16,641.47% $.91 $. 132, ,717 99, ,151 Irvine Spectrum 27 9,783,358 19, 418, % 1,47,72 1.7% $.99 $ (5,344) (41,456) 13,194 69,516 Laguna Beach 19 91,53 2, % 2, % $. $. (4,845) (4,845) Laguna Hills 73 1,4,287 2,782 2.% 19, % $1.11 $36.27 (8,78) (1,872) 1,428 52,797 Laguna Niguel 2 271,295.%.% $. $. Lake Forest 19 4,17,15 84, , $1.6 $ (3,77) 33,676 32, ,291 Mission Viejo , 18, , % $1.35 $. (2,694) (4,87) 2,526 6,225 Rancho Santa Margarita 12 1,632,415 17, , $.85 $285. (12,342) (17,342) 5, 2,786 San Clemente 158 1,988,325 3, , $1.1 $ ,21 8,741 16,49 51,225 San Juan Capistrano ,439 16, % 24, $1.31 $ ,717 (3,33) 1,717 3,879 South County Total ,52,518 19, 721, ,411,2 5.7 $1. $ ,253 9,229 19, ,55 West County Cypress 99 4,262,922 1, , $.9 $ ,868 7,738 3,868 35,52 Garden Grove ,32, , , $.77 $ ,824 (4,779) 154, ,68 Huntington Beach 68 14,484,56 97,46 415, % 478,88 3. $.82 $184.4 (53,32) 23,538 7,491 51,747 La Palma 16 1,78,25 89, , % $. $. (32,66) 41, , Los Alamitos 95 2,346,33.% 2,.9% $. $. 3,5 11,13 3,5 17,658 Seal Beach ,653.%.% $. $. Stanton 176 1,837,468 8,975.49% 62,56 3. $.5 $. 5,46 (1,719) 8,356 16,415 Westminster 139 2,356,569 58, % 159,7 6.7 $.85 $. (56,747) (54,947) 19,96 191,896 West County Total 1,696 4,9,954 97,46 1,6, ,893, $.79 $2.82 (122,742) 49,76 43,381 1,267,448 Orange County Total 9, ,633,4 1,367,18 869,627 4,752, ,198, $.87 $ ,829 66,58 1,975,35 5,723,532 Less than 9,999 3,299 2,28,14 291, , $1.3 $ ,668 19,13 236, ,991 1,-19,999 3,134 43,274,977 29, 892, ,221, $1.13 $ (3,329) (282,372) 55, ,882 2,-29,999 1,185 28,199, , , % $.98 $ , , , ,352 3,-39, ,61,251 73,2 394, % 562, % $.91 $236.5 (1,83) (91,983) 79,961 32,632 4,-49, ,33, , ,46 252, , $.86 $28.63 (19,952) (27,813) 72, ,6 5,-74, ,35, , , , $.83 $ ,31 19, , ,515 75,-99, ,34,817 78, , , % $.8 $ ,484 16,22 69,133 28,967 1,-199, ,62, ,938 1, , ,296, $.81 $ ,5 148,991 39, ,598 2, Plus ,489, , ,691 1,127, ,185,24 1.9% $.8 $. 81,149 56, ,696 1,333,995 Orange County Total 9, ,633,4 1,367,18 869,627 4,752, ,198, $.87 $ ,829 66,58 1,975,35 5,723,532 Lease rates are on a triple-net basis. VOIT REAL ESTATE SERVICES 3

4 OC Industrial NORTH ORANGE COUNTY In the second quarter, the North Orange County industrial market consisted 4,39 buildings totaling 11,295,685 square feet and had an availability rate 4.48%, which shows an increase from the previous quarter s figure 3.8. VACANCY & AVAILABILITY RATE NET ABSORPTION 4.48% 7K 6K 5K 4K 1.3 2K 1K K % 3Q18 4Q18 1Q19-1K VACANCY: Total Space Divided by Total Existing Inventory AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date NET ABSORPTION: Changes in the Amount Occupied Space from One Quarter to the Next LEASE TRANSACTIONS SALES TRANSACTIONS 2.M 16 2.M M M 7 1.5M M M M 5 1.M 8 1.M 4.75M 6.75M M 4.5M 2.25M 2.25M 1.M.M LEASED: Total Amount Space that Leased in a Quarter INVESTMENT SALES USER SALES North Totals Lease Less than 9,999 1,32 8,36, , % 22, $1.12 $ ,977 (39,139) 122,41 23,96 1,-19,999 1,395 19,278,87 379, % 544, $.93 $ (16,463) (148,825) 237,367 39,97 2,-29, ,28,85 197, , $.89 $ ,947 35,27 93, ,11 3,-39, ,71, , , $.93 $ (62,961) (34,25) 42, ,844 4,-49, ,835, ,465 42, 56, , $.8 $. (3,6) 39,99 21,118 83,85 5,-74, ,542, , , % 182, $.84 $. (26,536) 112,53 86,36 383,6 75,-99, ,116,193 78, , , $.76 $. 76,824 52,58 49, ,385 1,-199, ,325, , ,346.98% 857, $.79 $. 86, , , ,231 2, plus 66 22,845,37 521, , ,268,9 9.9 $.78 $. 184, , ,985 Total 4,39 11,295,686 1,367,18 42, 1,492, ,943, % $.81 $ , ,26 837,67 2,724,288 VOIT REAL ESTATE SERVICES 4

5 OC Industrial WEST ORANGE COUNTY In the second quarter, the West Orange County industrial market consisted 1,696 buildings totaling 4,9,954 square feet and had an availability rate 4.7, which shows a decrease from the previous quarter s figure 5.2. VACANCY & AVAILABILITY RATE NET ABSORPTION 8% 7% 5K 4K 2K 1K 4.7 K 2.6-1K -2K - -4K % 3Q18 4Q18 1Q19-5K VACANCY: Total Space Divided by Total Existing Inventory AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date NET ABSORPTION: Changes in the Amount Occupied Space from One Quarter to the Next LEASE TRANSACTIONS SALES TRANSACTIONS 1.2M 6 4K 2. 1.M K M 4 25K M 3 2K 1..4M 2 15K K 5..2M 1 5K 2.5.M K. LEASED: Total Amount Space that Leased in a Quarter INVESTMENT SALES USER SALES West Totals Lease Less than 9, ,87,63 36,813.9% 6, % $1.15 $ ,934 9,575 53,29 8,722 1,-19, ,385, , % 28, $1.7 $21. (24,29) (11,31) 16, ,581 2,-29, ,351,496 46, % 115, $.89 $ ,268 55,312 67,216 14,536 3,-39, ,29,52 126, , $.8 $. (78,125) (93,895) 2,4 31,3 4,-49, ,221,147 97,46 87, , $.79 $177.7 (8,79) (87,315) 13,485 13,485 5,-74, ,524,938 69, , $.73 $145. 1,792 78,753 75,-99, ,593,87.%.% $.82 $. 45,19 1,-199, ,391, , , $.78 $. 84, ,341 2, plus 23 8,325,884 38, % 876, $.65 $. 18, , ,81 Total 1,696 4,9,954 97,46 1,6, ,893, $.79 $2.82 (122,742) 49,76 43,381 1,267,448 VOIT REAL ESTATE SERVICES 5

6 OC Industrial AIRPORT AREA In the second quarter, the Airport Orange County industrial market consisted 2,656 buildings totaling 57,725,846 square feet and had an availability rate 5.1, which shows an increase from previous quarter s figure 5.. VACANCY & AVAILABILITY RATE NET ABSORPTION 4K 5.1 2K 1K K -1K 2.5-2K - -4K % 3Q18 4Q18 1Q19-5K VACANCY: Total Space Divided by Total Existing Inventory AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date NET ABSORPTION: Changes in the Amount Occupied Space from One Quarter to the Next LEASE TRANSACTIONS SALES TRANSACTIONS 1.2M 12 7K 35 1.M 1 6K 3.8M K 25 4K 2.6M M 4 2K 1.2M 2 1K 5.M K LEASED: Total Amount Space that Leased in a Quarter INVESTMENT SALES USER SALES Airport Totals Lease Less than 9, ,41,8 59,45 1.9% 111, % $1.48 $ ,84 62,553 52,16 139,165 1,-19, ,676,466 1, 29, , $1.8 $ ,287 3,67 17,27 317,581 2,-29, ,45,32 148, % 33, $.98 $ (19,63) 3,742 64, ,251 3,-39, ,84,471 73,2 93, ,6 4. $.97 $239. (1,532) 23,545 16,36 113,922 4,-49, ,683,132 49, , $.87 $ (25,562) 1,278 37,715 37,715 5,-74, ,237,288 81, , $.87 $189. 7,62 (75,266) 31,124 52,75 75,-99, ,26,576 93, , $1. $19.8 9,66 (9,66) 19,32 28,82 1,-199, ,957,473 1, , , $.77 $185. (8,968) (184,684) 125,5 291,42 2, plus 17 5,74,58 527, , , $.75 $. (6,) (5,1) 1, Total 2,656 57,725, ,167 1,478, ,95, $.85 $ (33,321) (215,823) 516,355 1,154,246 VOIT REAL ESTATE SERVICES 6

7 OC Industrial SOUTH ORANGE COUNTY In the second quarter, the South Orange County industrial market consisted 926 buildings totaling 24,52,518 square feet and had an availability rate 5.7, which shows an increase from the previous quarter s figure 4.8. VACANCY & AVAILABILITY RATE NET ABSORPTION 9% 8% 7% 2K 5.7 1K 2.9 K -1K % 3Q18 4Q18 1Q19-2K VACANCY: Total Space Divided by Total Existing Inventory AVAILABILITY: Total Amount Space that is whether Occupied, for Sublease, or at a Future Date NET ABSORPTION: Changes in the Amount Occupied Space from One Quarter to the Next LEASE TRANSACTIONS SALES TRANSACTIONS 6K 6 6K 18 5K 5 5K 15 4K 4 4K K 2 2K 6 1K 1 1K 3 K K LEASED: Total Amount Space that Leased in a Quarter INVESTMENT SALES USER SALES South Totals Lease Less than 9, ,178,546 52, ,58 3. $1.33 $32.47 (21,47) (13,976) 8,93 53,144 1,-19, ,934,363 19, 128, % 169, $1.29 $ (4,124) (35,916) 36,889 9,623 2,-29, ,162,16 66, , $1.16 $ ,776 33,297 52,45 142,464 3,-39, ,596,91.% 65, $.93 $35. 51,535 12,617 18,836 18,836 4,-49, ,293,47 58, , $1.1 $. 9,315 9,315 5,-74, ,46, , % $.91 $ , ,166 73, ,412 75,-99, ,118,241 26,7 2.39% 84, % $.8 $. (26,7) 78,572 1,-199, ,946,648 24, , $.96 $. 6,98 18,984 2, plus 16 5,244, , % 39, % $.95 $. (43,834) (46,554) 13,2 Total ,52,518 19, 721, ,411,2 5.7 $1. $ ,253 9,229 19, ,55 VOIT REAL ESTATE SERVICES 7

8 OC Second Quarter MARKET REPORT Orange County Industrial Rent Growth Continues to Climb by Stan Kwak and Seldon McKnight Stan Kwak VICE PRESIDENT / PARTNER ANAHEIM skwak@voitco.com Lic. # Selden McKnight ASSOCIATE ANAHEIM smcknight@voitco.com Lic. # Product Type MFG./DIST. Manufacturing / Distribution / Warehouse facilities with up to 29.9% fice space. Submarkets Heading into 3Q, rent growth in Orange County continues to be steady; however, the growth rate has slowed down compared with previous quarters. At the end 1Q this year, annual rent growth sat above for every submarket in the metro area. During 2Q, industrial rent grew.68% compared with 1.47% for 1Q, and 1.9 at this time last year. Tenants continue to seek properties in North County submarkets due to the affordability and proximity to the Los Angeles and Long Beach ports. Tenants in the North Orange County industrial market can expect to pay less than $8 per square foot per year net, compared to $2 per square foot per year net in the Coastal and South County submarkets. Tenants in the South Orange County industrial market are typically seeking R&D / Flex spaces, due to the large volume tech companies and biotech firms in the Irvine area. Many industrial properties are being repurposed to other uses including fice and multifamily, which is eating away at the already scarce supply industrial space. One example is the recent sale 91 E. South Street in Anaheim, a 35, square foot facility which is proposed to be repurposed into a multi-family apartment building beginning January West Orange 45 County North Orange County 5 22 NORTH Anaheim, Brea, Buena Park, Fullerton, La Habra, Orange, Placentia and Yorba Linda 91 Airport Area John Wayne Airport South Orange County While there is a shortage supply larger industrial buildings, Western Realco is working on a nearly one million square foot campus in Fullerton that is expected to be delivered by the end this summer. The infill business park development will consist 8 buildings totaling approximate 976,754 square feet, situated on roughly 44 acres land. Seven the eight buildings will be industrial uses, while the last building is projected to provide 42, square feet fice space. While vacancy rates are lower than they have been in years, and demand continues to outweigh the tight supply in the North County submarket, interest rates are on the rise, indicating there may be a shift in the velocity property movement in the market. Please Contact Us for Further Information WEST Cypress, Garden Grove, Huntington Beach, La Palma, Los Alamitos, Seal Beach, Stanton and Westminster AIRPORT Costa Mesa, Fountain Valley, Irvine, Newport Beach, Santa Ana and Tustin SOUTH Aliso Viejo, Foothill Ranch, Irvine Spectrum, Laguna Hills, Laguna Niguel, Lake Forest, Mission Viejo, Rancho Santa Margarita, San Clemente and San Juan Capistrano Tony Tran Regional Director Research ttran@voitco.com Anaheim, CA Carlsbad, CA Inland Empire, CA Irvine, CA Los Angeles, CA San Diego, CA This survey consists properties representing both single tenant and multi-tenant buildings. The lease rates are based on a triplenet basis. The information contained in this report is gathered from sources that are deemed reliable, but no guarantees are made as to its accuracy. This information is for Voit Real Estate Services use only and cannot legally be reproduced without prior written consent from the management Voit Real Estate Services. Voit Real Estate Services, Inc. License # Represented in 15 Markets Nationally & Internationally.