GlobeSt.com: Which submarkets are developing it?

Strasmann: Most of the development recently has occurred in the North Orange County market. Developing is difficult due to a lack of land as well as availability of industrial assets for sale to reposition. In 2016, Orange County delivered a little less than 800,000 square feet of new product. This year, the county has approximately 200,000 square feet of industrial product under construction, with several projects in the pipeline.

GlobeSt.com: How is the demand for light-industrial facilities changing in Orange County specifically, and how are developers addressing it?

Strasmann: In a perfect world, developers would construct high-clear-height facilities with excellent truck loading, designed for warehousing in general. These warehouses can then be modified into a more efficient e-commerce distribution facility based on use. Although we still have manufacturing in the county, the bulk of the activity is warehousing and distribution related. Last-mile users look very closely at service—who are their customers, where do they live, how fast can they deliver the product, how many people can they reach within a 30- to 120-minute time frame, and transportation costs. Secondly, they look at the efficiency and cost of the building, such as clear height, power supply, truck loading, rent, etc.

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NEWPORT BEACH, CA— As an infill, localized-distribution option, Orange County is well positioned to meet demand for light-industrial space due to all its industrial inventory, population density and household income, CBRE's senior managing director Kurt Strasmann tells GlobeSt.com. According to a recent report from the firm, the schematics of the e-commerce model has prompted a supply-chain arms race within the Greater Los Angeles/Orange County/Inland Empire region due the competitive advantage it will offer. In response, developers are attempting to cash in on the supply-chain opportunity by building more speculative light-industrial product in areas close to dense populations.

We spoke with Strasmann about the Orange County market in particular, focusing on the light-industrial supply in that market and whether it is prepared to meet the demand for this product type.

GlobeSt.com: How is Orange County supplied with this light-industrial space?

Strasmann: Very much so in the Orange County region. Orange County represents a little more than 250 million square feet of industrial inventory. The market is an infill location made up of a diverse inventory of industrial buildings, typically smaller than 100,000 square feet. The OC is not typically known to users of big box—300,000 square feet and up—e-commerce and fulfillment-hub locations, but rather is a localized market with the bulk of the product in the 10,000-square-foot to 50,000-square-foot range. Thus, as an infill localized-distribution option, the OC is well positioned due to all its industrial inventory, population density and household income. The difficulty is the high demand for industrial buildings from a variety of industries, but very limited vacancy.

GlobeSt.com: Which submarkets are developing it?

Strasmann: Most of the development recently has occurred in the North Orange County market. Developing is difficult due to a lack of land as well as availability of industrial assets for sale to reposition. In 2016, Orange County delivered a little less than 800,000 square feet of new product. This year, the county has approximately 200,000 square feet of industrial product under construction, with several projects in the pipeline.

GlobeSt.com: How is the demand for light-industrial facilities changing in Orange County specifically, and how are developers addressing it?

Strasmann: In a perfect world, developers would construct high-clear-height facilities with excellent truck loading, designed for warehousing in general. These warehouses can then be modified into a more efficient e-commerce distribution facility based on use. Although we still have manufacturing in the county, the bulk of the activity is warehousing and distribution related. Last-mile users look very closely at service—who are their customers, where do they live, how fast can they deliver the product, how many people can they reach within a 30- to 120-minute time frame, and transportation costs. Secondly, they look at the efficiency and cost of the building, such as clear height, power supply, truck loading, rent, etc.