Tulfra Realty Co., a Rochelle Park, NJ company that specializes in buying and repositioning Northern New Jersey industrial properties, has acquired the 50-year-old, 507,400-sf L.A. Dreyfus Co. building in Edison for conversion to industrial condominiums. Though Tulfra partner S. Lloyd Tulp says his company and its acquisition partner, investment funds manager Hampshire Cos. of Morristown, NJ, are confident of the project's viability, the acquisition comes at a time the industrial-condo market appears to have entered a period of slackened interest. Tulp says the Dreyfus building's age reduced its value to a point where the cost made sense in his market.

Despite the fall-off in demand, O'Brien believes the underlying fundamentals remain strong. In fact, he is using the down time in Southern California to scout Phoenix and Salt Lake City for lower-cost development possibilities. But those markets, especially the latter, remain largely untested, which could be problematic.

Ryan Smith, vice president of San Antonio-based Cross & Co. reports his company abandoned plans for what would have been that market's first industrial condo project and will rent the space instead. "We marketed it for six months but really didn't have any activity," he says. "I don't know if it was the lack of depth in the market, the change in economy or our inability to market. But I don't see any upside in condos here at this point."

O'Brien acknowledges each market is unique when it comes to industrial condos and must be closely examined, but he says markets where the product has proven itself will turn around as lease rates also rise in response to higher construction costs. "Southern California rents were fairly flat for a decade, but we've seen a pretty steady increase recently," he says. "We lag that, but once the guy who needs 5,000 sf and will always need 5,000 sf gets tired of rental increases, he's going to look into buying. And we'll be there for him."