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July 8, 2014
Why Investors Love OC Retail
Forget Fifth Avenue. OC's now one of the hottest destinations for retail investors, and Faris Lee Investment's Matt Mousavi tells us why. (First of all, we don't have horses walking around in the middle of the street.)
Thank the master-planned nature of most of its cities, Matt says (he's pictured in Vail, celebrating the Fourth with his family). This creates high barriers to entry for new development while boosting rent growth and real estate value appreciation for existing retail centers. They're already on the upswing since the local economy is moving along and jobs are being created (and with jobs comes to desire to buy stuff, sure as night follows day).
Matt and colleague Patrick Luther recently repped the seller in the sale of Foothill Center, a 19k SF, 95%-occupied shopping center at 20641-20671 Lake Forest Dr in Lake Forest. Investor interest came from far and wide, Matt says—Faris Lee made a point of marketing the property to target foreign investors, particularly Asian capital—and ultimately a private Chinese investor won out. The sale resulted in a 4.81% cap, one of the lowest on record for an unanchored retail center in south Orange County, he says.
Hot Industrial and Office Means High Rates... and More
A steady increase in industrial leases in Orange County and difficult development means there just aren't that many sites for industrial, leading to a supply shortfall, JLL Orange County's Matt Christensen tells us. That's driving up purchase prices and lease rates, so large industrial space users, especially those looking to expand, are making deals to lock in rates as fast as they can. (It's like how everyone hoarded incandescent bulbs before they were outlawed... or was that just us?)
Recently Matt repped Goodwill Industries of Orange County in a lease expansion for 37k SF of industrial space at 2250 S Yale St in Santa Ana, bringing its total space to more than 72k Sf for its e-commerce and retail warehousing. After studying the market, Goodwill decided that expanding its operations at 2250 S Yale was its best option, Matt says. CBRE repped the landlord, Skeffington Enterprises, in the deal.
The OC office market is cooking, too. The county added nearly 27,000 jobs in Q2 alone, JLL reports, with the construction sector leading the way. Even more positive: OC saw 1.1M SF of office absorption during the second quarter, the highest amount since 2005 (one of those hard-to-remember pre-recession years). Rents are rising, and investors have taken note: This week, RREEF Property Trust inked a deal to buy the 73k SF Anaheim Hills Office Plaza for more than $18M. According to RREEF chairman Todd Henderson, the investor not only liked the property because it's one of the newest in north OC (finished in '08), but also because RREEF will be able to grow NOI as the sector continues to heat up.
Infill Residential Gets Even Tighter
Another rarity in OC: infill residential sites, according to Brandywine Homes VP Dave Barisic. But when a developer's able to make it work, there's heavy demand for the product. Brandywine Homes broke ground recently on Covington, a 51-townhouse property on more than five acres near Yorba Linda Boulevard and Blair Street, across from the Richard Nixon Presidential Library and Museum. It's something not seen in a very long time in Yorba Linda, he says.
Sperry Commercial Franchising Nationally
Sperry Commercial regional manager David Mashian, who's in charge of the national franchising and property management divisions, tells us that huge plans are in the works for the Irvine-based, full-service firm. Sperry Commercial sells and leases third-party as well as Sperry-owned-or-managed properties; its agents' average seniority is around 18 years, with 37 of them currently managing 9.2M SF of properties valued at over $500M. David says that the company believes strongly in cooperation and collaboration with the brokerage community, giving them maximum market exposure. Its popular Broker Exchange invites competing brokers to showcase their properties. Now this winning philosophy is going national; stay tuned for updates. For more info on our sponsor, click here.
Don't Miss Bisnow's Construction & Development Summit
All the sectors in OC are running hot, which can only mean good things for construction and development. Join us at Bisnow'sOrange County Construction & Development Summit on July 30 at the Newport Beach Marriott Hotel & Spa, where you'll learn about the latest trends affecting the region—from ground-up development to repositioning and improvement of current assets—and how you can get involved. We'll have expert panelists from DJM Capital, Guthrie Development, Irvine Co, Keating/khang Architecture, Rexford Industrial, and Saunders Commercial Seismic Retrofit, as well as plenty of networking. Sign up here!
Here Come the Y Games!
It's nearly time again for NAIOP SoCal Young Professional Group's Y Games, which will include water balloon launch, kayak race, and trike race. The YPG is collecting clothing this year to donate to Working Wardrobes. Team captain Jim Proehl of PM Realty Group tells us that to get ready for the trike race, “You need to transform your state of mind back to when you were four years old so you can visualize your path around the track.” The event this year will be July 25 at Newport Dunes in Newport Beach. More info here.
4th Bisnow Video
By popular demand, Bisnow Education offers a 4th instructional video for those of you looking to make a killing in the real estate game:
"How to Value Property."
Peter Linneman, founder of the Wharton School's real estate program, shares his unparalleled knowledge on the topic, and such issues as:
the difference between net operating income and cash flow
subsidized vs. unsubsidized properties
discounting cash flow
CAP rates, in depth
and numerous other topics
All for just $59, but wait – there's more: Purchase all four Bisnow Education videos for the incredible price of $149 and we'll send you an exclusive Peter Linneman mouse pad! Just kidding. This isn't QVC—yet.
No, knowledge and sophistication will be your rewards. Even if you're a world-weary real estate vet or investor, you'll find fresh insight and new angles that will re-ignite your brilliance; and newbies will be able to digest the information in bite-sized, five-minute spoonfuls that will go down like candy.
