Eric Smith · Orange County Market Update Anaheim Irvine Inland Empire Los Angeles San Diego ...
Transcript of Eric Smith · Orange County Market Update Anaheim Irvine Inland Empire Los Angeles San Diego ...
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Orange County Market Update
Anaheim
Irvine
Inland Empire
Los Angeles
San Diego
www.VoitCo.com
January 24, 2019Eric SmithSIOR Candidate MemberCCIM Candidate Member
Tel: 714.935.2310Fax: 714.978.9431Broker License: #01940591e-mail: [email protected]
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ORANGE COUNTY INDUSTRIAL MARKET
Positive:• Historically low cost of capital• Sub 3% vacancy rate• Reasonably vibrant economy
Negative:• Global issues- China slow down,
trade war• State and Federal debt• High rent and high wage growth• Looking over your shoulder
Forecast:• Lower transaction volume –
declining inventory• Lease Rates – Still Rising• Sale Prices – Still Rising• Capital markets open – SBA,
CMBS, Life Insurance & Banks• Continued investor demand for
quality assets• Tenants / Buyers look East
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ORANGE COUNTY INDUSTRIAL MARKET
• Lease Rates - Anticipate asking rents to increase by a minimum of 3% to reach a level of $0.93 per square foot by the fourth quarter of 2019 with more robust increases coming in Class A buildings with modern features, such as 30' warehouse clearance, ample dock-high loading, fenced yards and immediate freeway access.
• Vacancy - Availability will be a significant hurdle for tenants in 2019 and reaction time will be critical. “Off market” deals will be, and arguably have already become, the norm and tenant concessions will continue to be severely limited in this competitive market. With very little new product coming online
• Overall – The Orange County industrial market will continue to perform well in 2019. Expect healthy economic conditions to continue through 2019, buoyed by consumer and business confidence. The fundamentals are projected to continue a positive path for the remainder of the year. Growing trade is poised to accelerate trends in the industrial sector, with strong absorption driving vacancy contractions. Absorption is projected to continue growing, leading to declining vacancies.
Forecast
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ORANGE COUNTY INDUSTRIAL MARKET
Orange County Industrial Market Statistics
Inventory Added 1,237,534 474,187 770,655 160.98%
Under Construction 841,447 1,083,684 274,187 -22.35%
Vacancy Rate 2.67% 2.33% 2.00% 14.59%
Availability Rate 4.98% 4.77% 3.84% 4.40%
Average Asking Lease Rate $0.90 $0.84 $0.75 7.14%
Average Asking Sale Price $290.27 $264.28 $235.97 9.83%
Sale & Lease Transactions 16,472,974 19,699,142 22,298,346 -16.38%
Gross Absorption 10,998,734 10,598,595 11,997,906 3.78%
Net Absorption 469,123 (298,412) 1,654,130 N/A
% Change vs. 2016201620172018
Sheet1
UnemploymentMid Counties Industrial Market Statistics
% Change% Change
4Q20003Q20004Q1999vs. 4Q994Q20003Q20004Q1999vs. 4Q99
Nation4.00%3.90%4.10%-2.44%Inventory89,351,04088,942,38487,548,6552.06%
State4.80%4.80%4.90%-2.04%Construction926,2551,037,6931,274,587-27.33%
LA4.90%5.50%5.60%-12.50%Vacancy3.95%4.25%4.87%-18.89%
OC2.20%2.50%2.10%4.76%Availablity4.54%5.12%5.70%-20.35%
SD2.60%3.00%2.50%4.00%Pricing$0.51$0.47$0.4415.91%
Orange County Industrial Market StatisticsOrange County Research & Development Market Statistics
201820172016% Change vs. 2016% Change
4Q20003Q20004Q1999vs. 4Q99
Inventory Added1,237,534474,187770,655160.98%Planned Construction576,181467,977869,181-33.71%0
Under Construction841,4471,083,684274,187-22.35%
Vacancy Rate2.67%2.33%2.00%14.59%
Availability Rate4.98%4.77%3.84%4.40%Availablity6.20%6.36%7.35%-15.65%
Average Asking Lease Rate$0.90$0.84$0.757.14%Pricing$0.95$0.93$0.896.74%
Average Asking Sale Price$290.27$264.28$235.979.83%
Sale & Lease Transactions16,472,97419,699,14222,298,346-16.38%
Gross Absorption10,998,73410,598,59511,997,9063.78%
Net Absorption469,123(298,412)1,654,130N/A
Activity1,700,9861,728,2261,428,50019.07%
Orange County Office Market StatisticsOrange County Industrial Flex Market Statistics
% Change% Change
4Q20003Q20004Q1999vs. 4Q994Q20003Q20004Q1999vs. 4Q99
Under Construction2,289,0572,752,2162,875,533-20.40%Under Construction786,823499,701994,012-20.84%
Planned Construction6,181,6215,863,1935,647,8529.45%Planned Construction1,224,6401,056,8972,607,543-53.03%
Vacancy9.27%8.24%9.76%-5.02%Availablity7.38%14.81%21.56%-65.77%
Availability14.50%13.05%10.92%32.78%Pricing$1.60$1.59$1.3915.11%
Pricing$2.23$2.15$2.077.73%Activity645,815327,712259,858148.53%
Absorption401,2931,382,022403,464-0.54%
Sheet2
Sheet3
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ORANGE COUNTY INDUSTRIAL MARKET
2.67%
4.98%
0%
1%
2%
3%
4%
5%
6%
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
Vacancy Availability
Market Overview
Vacancy vs. Availability
Percent Forecast
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ORANGE COUNTY INDUSTRIAL MARKET
$0.90
$0.55
$0.60
$0.65
$0.70
$0.75
$0.80
$0.85
$0.90
$0.95
$1.00
$1.05
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
Leasing Market
Average Asking NNN Lease Rate
Forecast
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ORANGE COUNTY INDUSTRIAL MARKET
Lease Transaction Activity
0
1,000,000
2,000,000
3,000,000
4,000,000
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
Square Feet
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ORANGE COUNTY INDUSTRIAL MARKET
$290.27
$120$130$140$150$160$170$180$190$200$210$220$230$240$250$260$270$280$290$300
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
Sales Market
Average Asking Sales Rates Per SF
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ORANGE COUNTY INDUSTRIAL MARKET
Sale Transaction Activity
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
Investment Users
Square Feet
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ORANGE COUNTY INDUSTRIAL MARKET
-800,000
-400,000
0
400,000
800,000
1,200,000
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
Net Absorption
Square Feet
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ORANGE COUNTY INDUSTRIAL MARKET
Annual New Deliveries vs. Availability
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
08 09 10 11 12 13 14 15 16 17 18
New Deliveries Availability Rate
Square Feet Percentage
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ORANGE COUNTY INDUSTRIAL MARKET
Major Transactions for 2018
Sales Activity
Property Address City Square Feet Sale Price Buyer Seller
300 E. Cypress St. Brea 329,000 $19,604,000 Kh Acquisition I Co. Kirkhill-Ta Co
50 Icon Foothill Ranch 307,781 $56,500,000 Prologis AEW Capital Managment
2300-2320 Red Hill Ave. Santa Ana 212,121 $43,625,000 CT Realty Ricoh Development of CA
1256 N. Magnolia Ave. Anaheim 208,000 $36,042,000 Goodman North America Vera Guerin
17111 Red Hill Ave. Irvine 193,366 $36,000,000 Edwards Lifesciences LLC MDD Red Hill LP
Leasing ActivityProperty Address City Square Feet Effective Rate Tenant Owner
1123 E. Warner Ave. – Renewal Tustin 500,625 $0.66 NNN Ricoh Bedrosian Tustin LLC
3454 E. Miraloma Ave. – Renewal Anaheim 300,000 $0.82 NNN Kuehne + Nagel, Inc. DCT/Prologis
5701 Skylab Rd. – Sublease Huntington Beach 280,460 $0.78 NNN Hybrid Apparel C&D Zodiac, Inc.
1501-1601 E. Cerritos Ave. – Renewal Anaheim 206,707 $0.7 NNN Disney Inland Empire Realty Holding
1211 N. Miller St. – Renewal Anaheim 200,646 $0.74 NNN Targus, Inc. TIAA-CREF
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ORANGE COUNTY INDUSTRIAL MARKET
Orange County Top Industrial Lease Comparables
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ORANGE COUNTY INDUSTRIAL MARKET
Orange County Top Industrial Lease Comparables
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ORANGE COUNTY INDUSTRIAL MARKET
Orange County Top Industrial Sale Comparables
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ORANGE COUNTY INDUSTRIAL MARKET
Orange County Top Industrial Sale Comparables
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ORANGE COUNTY INDUSTRIAL MARKET
Orange County Top Industrial Sale Comparables
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ORANGE COUNTY INDUSTRIAL MARKET
Orange County Top Industrial Sale Comparables
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4th Quarter 2014 Report NORTH ORANGE COUNTY INDUSTRIAL MARKET
Hypothetical Case Example• Joe Widget maker signed a 5 year lease in
2014 for his 50,000 sf building at $.55/sf with $.12/sf NNN
• His lease comes up this year at $.85/sf with $.20/sf NNN (his building sold during the 5 years and the taxes were re-assessed.
• Joe is looking at a 35.29% increase on base rent and 36.19% overall increase
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4th Quarter 2014 Report NORTH ORANGE COUNTY INDUSTRIAL MARKET
Hypothetical Case Example Cont.
• Joe’s rent went from $402,000 to $630,000• Joe’s wage growth also grew 15% during
this time• 25% tariff on a critical component to Joe’s
Widget• Joe gets hit with a major lawsuit in Q1 of
2019, what does Joe do?
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4th Quarter 2014 Report NORTH ORANGE COUNTY INDUSTRIAL MARKET
Other fun things occurring in Industrial Real Estate
• 2 Story Warehouses – Prologis Georgetown Crossing in Seattle
• MARIJUANA! Measure X/M in Santa Ana and Costa Mesa
• Final Mile/Last Mile• Self-driving/Autonomous Trucks• 36’ Ft Ceiling Clearance, Thicker Slabs
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ORANGE COUNTY INDUSTRIAL MARKET
To download this presentation, please go to:
http://www.voitco.com/ftp/SoCal_Appraisal_Institute_2019_Orange_County.pdf
To download our reports, please go to:
http://voitco.com/market-research/market-reports
Slide Number 1Slide Number 2Slide Number 3Orange County Industrial Market Statistics Slide Number 5Slide Number 6Slide Number 7Slide Number 8Slide Number 9Slide Number 10Slide Number 11Slide Number 12Slide Number 13Slide Number 14Slide Number 15Slide Number 16Slide Number 17Slide Number 18Hypothetical Case ExampleHypothetical Case Example Cont.Other fun things occurring in Industrial Real EstateSlide Number 22