ONTARIO, CA—Buchanan Street Partners has purchased Waterside, a two-building office property in the Inland Empire, after seeing occupancies and rental rate growth in two nearby office properties that the company owns, GlobeSt.com reports exclusively. The 159,092-square-foot property was purchased from a joint venture between Greenlaw Partners and Walton Street Capital for an undisclosed price.

According to Bob Dougherty, a partner at Buchanan Street Partners, the company has been privy to the recovery of the office market in Ontario because it owns two other properties in the market. “Our occupancies have tightened significantly, and rents are firming up nicely,” he tells GlobeSt.com. “Waterside Center represents an outstanding opportunity to participate further in this upward trend through a well-leased, best-in-class project. We were attracted Waterside center's strong cash flow in combination with a purchase price, which is well below replacement cost.  Rents have some room to run before new construction is economically feasible, reducing the competitive threat from new supply.”

The Inland Empire is largely known for its strength in the industrial sector, where it is one of the top markets in the country; however, other sectors have lagged a bit. Dougherty notes that office growth is typically driven by housing activity, but the Inland Empire office market has been recovering without housing growth. Dougherty, however, he expects the housing market to begin picking up as well. “While we don't expect housing to dominate as it did in the previous cycle, we expect a return of these tenants over the next two to three years, and this should provide a shot in the arm to the market, particularly as the price gap between the Inland Empire and coastal counties grows. Orange county rents have only recently begun to rise, but they rise quickly when they do. We expect the value gap to widen significantly over the next 6-9 months.”

Located at 3110 and 3200 East Guasti Road in Ontario, the property is part of the Centrelake Business Park, a 70-acre master planned corporate and financial center, and has close proximity to the Ontario International Airport and the I-10 freeway. At the time of the sale Waterside was 97% leased. The property features outdoor courtyards with water features, an energy management system and a fiber-optic infrastructure for optimized bandwidth. A CBRE team led by Kevin Shannon represented the seller, while Buchanan Street Partners represented itself in the transaction.

The property was built in 2007 and is in great condition, so no renovations are required or planned for the property. “Newer assets—2005 and 2007 construction—present less capital risk for a longer hold strategy, if we so elect. No major renovations are planned given the project's recent vintage,” says Dougherty, about the company's plans for the property, adding; “we plan to renew or re-lease 2016-2018 expiring occupancies at mark-to-market rents and then assess how the capital markets will cooperate with a potential exit.” 

The company has office properties in markets throughout Southern California, as well as markets throughout the country, and recently said in an interview that they are bullish on Northern San Diego County, due to the highly skilled and educated workforce in the area. The firm plans to buy $500 million worth of real estate this year, and without getting into specifics, said they were looking at opportunities in the San Diego market.