Small-Box Industrial Sales Demonstrate Solid Demand

In Orange County’s industrial market, everything sells. The strong demand for industrial product has pushed vacancy rates to historic lows, and as a result, industrial investment opportunities are limited. When properties do come to market, investors strike. This was the case in the sale of two separate small box industrial facilities in Newport Beach. The two assets—both around 30,000 square feet—traded hands in off-market transactions to private investors looking for investment opportunities in the market. The Lee & Associates brokers who worked on both deals say that this is part of the new normal of robust industrial demand.

“This product has been hard for buyers to find,” Jim Snyder, SVP and principal at Lee & Associates – Newport Beach, tells GloebSt.com. “The demand has subsided. It has continued on.” Patrick Lacey, an SVP at Lee & Associates – Newport Beach, adds, “The lack of inventory is fueling demand for all building classes for sale.”

The industrial market in Orange County is dynamic and has a healthy mix of tenants and industrial uses, and investors are happy to take on smaller buildings with a mixed bag of tenants. The two small box industrial building sales—in which Snyder and Lacey represented the buyers—in an example of the broad range of properties investors are picking up due to the tight market. “Both of them have tenants that fit the nature of the building,” explains Snyder. “The property on Euclid was built as a showroom property, and although it was purchased as an investment, the buyer was in an exchange and bought it as part of a 1031 exchange. At Carnegie, there is a mixed-use bag of tenants that continues to dominate the tenant pool in Orange County. There is a scientific company, a corporate office tenant and a non-profit, so it is a very mixed bag. That fits the nature of Orange County’s entrepreneurial community. Most of the companies in these smaller buildings fit the mold of being private companies that are entrepreneurial driven.”

This investment demand doesn’t seem to be subsiding any time soon, even with rising interest rates on the horizon. “I haven’t seen any changes yet. I think that we are still early with the effects of the rates hikes,” says Lacey. “There are still a lot of investment dollars out there looking for Orange County real estate.” Overall the market fundamentals remain strong, and user demand for product—which has fueled the low vacancy rate and climbing rents—isn’t slowing down. “There is continued interest from investors to look for the right opportunities,” Snyder adds. “These two properties happened to close together, but they are very unique buyers and very unique sales. Our private investors are very active and continue to look for good opportunities. The fundamentals of the market are still solid.”