Orange County has a demand problem coupled with an inventory surplus.
A new wave of commercial construction in Orange County leaves me wondering: Where are all the new tenants?
Noteworthy among these during that period were the Johnson Control Campus in Fullerton, Mission Land acreage in Brea, Fender buildings in Fullerton, and some of the Boeing holdings in northeast Anaheim. Generational wealth was created as these addresses continued to appreciate while no new similar-sized stock developed.The Beckman cluster of buildings in Fullerton gave way to a group of large logistics hubs totaling almost 1 million square feet. National Oilwell Varco shuttered plants in Brea and Orange. Brea now boasts a 108,000-square-foot address while demolition in Orange started this month.
Interestingly, despite the significant investment and construction efforts, there seems to be a glaring absence of tenants ready to occupy these remaining newly built spaces.The economic and market conditions that fueled the previous industrial boom differ from those we encounter today. Fluctuating land pricing, changing city policies, varying capital availability, rising construction costs and shifting market demands all contribute to the complex equation.
The motivations and investment strategies of these new players align with the needs of large potential tenants – who are awaiting some certainty before moving – further exacerbating the vacancy issue. Generally, all are for lease only, which eliminates occupants in this size who want to own. Asking rates exceed $2.00 triple net. Class A buildings leased for less than a buck in the mid-2000s.
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