Industrial Vacancies at an 11-Year Low

Vacancies for Orange County industrial properties have dropped to the lowest point since 1988, when Grubb & Ellis began keeping records, the commercial brokerage firm reported. The rate for empty industrial space fell to 6.2%, a full percentage point lower than over the same period a year ago, according to Grubb & Ellis.

As a result, rents have hovered near record rates, and purchase prices have soared for firms that would rather own than lease. But with Orange County land costs soaring, there have been fewer facilities built or available for rent.

“We’re seeing a very tight market,” said Thomas Ewing, president of Newport Beach-based Ewing Development, which has developed 1.5 million square feet of industrial property over the past 20 years.

Ewing has three industrial sites under construction nearby in Santa Ana totaling about 200,000 square feet. The company also will break ground this summer on a $17-million, 286,000-square-foot industrial park in Santa Ana, just north of MacArthur Boulevard and west of Harbor Boulevard. The park should be completed by early next year, he said.

A booming economy has fueled an expansion spurt by midsized companies, which want more space, said Mike Merk, a Grubb & Ellis broker. Industrial space in Central Orange County has been renting and selling at a brisk pace, Merk said. That area’s vacancy rate has fallen to a historical low of 4.6%, Grubb & Ellis said.

Analysts expect vacancy rates will remain tight. “It is difficult to overbuild in the current circumstances,” said Chuck Noble, president of Lee & Associates in Orange.

Merk said the industrial office market should remain tight through the middle of next year. “Interest rates are low,” he said. “Companies are expanding, and there’s not an oversupply of product.”