February 11, 2020 Comments Off on Connect Q&A: JLL’s Louis Tomaselli on Industrial 2010 to Today Views: 599 California News, Orange County

Connect Q&A: JLL’s Louis Tomaselli on Industrial 2010 to Today

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Of all the asset classes in today’s market environment, Southern California Industrial seems to have a never-ending and ever-growing demand from screen-to-door e-commerce and supply-chain intensive operators. Nowhere has the change in space demand been more apparent than in Orange County, where land constraints pit redevelopment for a variety of competing uses (new residential, mixed-use and creative office) and dated building inventory tied to former aerospace and manufacturing based operators against 21st century logistics requirements.

Connect Media had the opportunity to engage longtime industrial market leader Louis Tomaselli of JLL on the topic of the evolving OC Industrial landscape in a look at conditions from 2010 to 2020, with a few insights for today in his answers below:

Q: What needs to be said about OC industrial today and how we got to here from 10 years ago?

A: Let’s start with a few historical data points. In 2010, 26 million iPhones were sold at year end. The last year that sales figures were released (2018) apple sold 2.2 billion iPhones. In that same 10 years, the Orange County labor pool has grown by 300,000 people, adding mostly highly skilled, higher wage jobs. The median household income today is almost $90,000 and the GDP grew by $70 billion…that is a massive shift.

However, today’s industrial base of roughly 250 million square feet has not grown to meet that demand, and so the resulting fundamentals are as follows:

– Average rents have increased 85% to almost $1.00 per square foot NNN in the past 10 years.
– Vacancies have been reduced over 100% from 6% to less than 3%.
-Big box leasing for warehouse e-commerce retailers and related supply chain operations, a driver for 80% of our economy today, moved from zero leases in 2010 to close to three million square feet of leases in 2019.

Q: What type of tenant is dominating OC’s aging/existing industrial base and/or new delivery construction in the contemporary market?

A: Today, the Orange County market is predominantly made up of higher tech assembly and distribution warehouse facilities, retail e-commerce and supply chain facilities to deliver the consumer products we all demand within days if not 24-hours.

The OC is one of the most affluent communities in California, and if the state was its own country it would be the sixth largest economy by GDP. In 2010, our economy was led by smaller entrepreneurial firms that occupied smaller buildings in the 10,000 to 20,000 square-foot on average. This was also a beginning point for larger campus users like Boeing and Bohlinger migrating elsewhere after closing most of their OC facilities.

Unlike in 2010, today the majority of industrial space occupiers in Orange County are in facilities well over 50,000 square feet, and often many hundreds of thousands of square feet when it can be found. These users are typically focused in the business of logistics and supply chain operations, direct-to-consumer or business-to-business models serving Southern California’s population of 20 million-plus consumers.

Q: What uses are developers building industrial for today, in anticipation of what future realities?

A: The leading challenge for Orange County industrial is that only 7% of the 250 million square-foot base was built in year 2000 or afterwards, and even comes close to meeting today’s Class A new construction demands. The challenge for developers in 2020 is to redevelop older facilities into the new Class A facilities desired by supply chain logistics and e-commerce companies. Mandatory features include very high cube spaces and more parking for associates and vehicle deliveries. The likelihood moving forward is that multi-story industrial facilities will be needed to deliver this type of space in a market that is a completely land-constrained and now a mature, urban infill market.

Expect OC lease rates to continue to increase, as the price for redevelopment of older industrial properties becomes more expensive to acquire and demolish to deliver the millions in square feet of Class A product in demand by occupiers across Southern California and the globe in 2020 and beyond.

Connect With JLL’s Tomaselli


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