Manufacturers Hungry for OC Space Again

Tenants looking for high-quality manufacturing space are sometimes hitting a brick wall. (Which is only good if they manufacture bricks.) Saywitz Co SVP Robert Ritschel tells us why.

1) Manufacturing's demise is greatly exaggerated.

Demand from the manufacturing sector in Orange County and Southern California has increased over the past 12 months, Robert says. The exodus of manufacturing companies during the downturn is clearly finished. The companies that felt it was better to do business elsewhere have left. Others that were not financially viable were either acquired, merged, or no longer exist.

2) Companies want to be here.

The remaining manufacturing companies choose to be in SoCal and OC for a variety of reasons, though inexpensive real estate isn't one of them, Robert says. Perhaps they want a location near one of the prime distribution hubs on the Pacific Rim, or they're run by execs who choose to live in Orange County. Pictured: the 54k SF 640 N Puente St in Brea, which HVAC systems maker Air Treatment Corp recently bought. Saywitz's Andrew Herron repped the buyer, while Voit Commercial's Seth Davenport repped the seller.

3) Manufacturing space is tighter now.

Aerospace, plastics, and food-related industries, among others, are all in expansion mode. (As a result, so are our waistlines.) Finding the right space in OC can be tough, Robert notes. Beyond size, one must consider appropriate power and other manufacturing-specific needs. “Our advice to our manufacturing clients is to begin the exploration of their real estate requirements early.”

Labor Shortage

The recovery is real, but with it comes a major concern over the availability of trained labor, says KPRS Construction Services prez Joel Stensby; the increase in number of projects puts stress on the current labor pool. That, as well as potential material increases, will put upward pressure on pricing in the near future. Joel and other industry experts will be panelists at Bisnow's third annual OC State of the Market at the Hotel Irvine on March 20. Sign up now.

How Sellers Can Get Top Dollar

Even as buyers are eager to find assets, sellers can't neglect a strategic plan, Irvine-based Faris Lee Investments CEO Richard Chichester tells us. For retail, that can include separating an asset from the rest of the retail center, or a pay-off to defease the loan. Also, lease auditing gives a chance to "reconcile the lease provisions with the operations of the asset,” Richard says. “Too many times there are gaps in how the lease is being interpreted and managed, and there are opportunities to reconcile it to maximize value.”

Recently Richard, with colleagues Matt Mousavi, Patrick Luther, and Tom Chichester, repped both the buyer, Arizona-based STORE Capital, and a private Kentucky-based seller, in the $36M sale of four retail properties in Kentucky and Tennessee, each occupied by LA Fitness. According to Richard, lease audits of each property uncovered a total of over $3M in additional value by IDing areas where NOI could be increased. “Abstracting the lease to clarify and reconcile all key financial, business and legal information is critical,” he says. (It's the legal jargon equivalent of looking under every couch cushion for change.)

CREW Orange County's SPIRE Awards Announced

Commercial real estate's top names gathered at Costa Mesa's Center Club late last month for Orange County commercial real estate SPIRE Awards (that would be Superior Performance in Real Estate, if you're keeping track). The event, launched by CREW's Orange County chapter, featured Buchanan Street Partners CEO Robert Brunswick as guest speaker and CT Realty Investors CEO James "Watty" Watson as emcee. Among the winners: those who worked on The Bill Holmes Tower at The Children's Hospital of Orange County (New Construction); LBA Realty's Karen Penhall and Tracey Hagadorn--pictured with Watty--for Park Place in Irvine (Building Renovations); Cornerstone Real Estate Advisors managing director Lydia Shen (Women); Driver SPG president Karl Kreutziger (Philanthropy). For a complete list of our sponsor's winners, click here.

New Bisnow Education Video!

By popular demand, we've just released a second video we did with Peter Linneman, widely considered the top professor of commercial real estate in the US. This new video is called "Real Estate Finance," i.e., on how you get money to do deals. Although an advanced topic, it's purposely very simple to understand. It's 77 minutes, broken into 5-minute increments, so you can watch or listen as you are waiting in line, or at the gym, or lying in bed. (To each his own.) Click here for the new video and here for the old video.