The driveway was rocks and gravel. The parking lot was dirt and mud in some places. Still, a distinguished group of city officials, developers and commercial real estate marketing professionals gathered enthusiastically for the grand opening of three warehouse-sized buildings at the end of 3rd Street in Lake Elsinore on a Thursday morning. The buildings represented not only a long-awaited completion of this particular project but signaled the upcoming growth in a segment of the real estate market – industrial and commercial — driven by rapidly-growing demand for warehousing, distribution and manufacturing space.
The three-part project involves two building phases and vacant land.
Phase I includes three buildings, zoned for general manufacturing, offering 74,200 square feet of industrial space, 9,936 square feet of office space and 4,968 square feet of mezzanine office. The three buildings sit on 4.02 acres. Two of the buildings can be combined by knocking out walls to provide 50,774 square feet on 2.55 acres.
Phase II will add six more buildings, ranging from 8,154 square feet to 11,258 square feet.
The adjoining land available for sale, lease or build-to-suit – 1.57 to 8.78 acres – will be accessed via Chaney Street.
Rod Oshita, principal for Fairway Commercial Partners, shared a brief history of the project dating back 10 years.
“This is a longtime coming,” Oshita said. “We’ve overcome lots of obstacles and challenges.”
All across the country, according to market research expert Marcus & Millichap, vacancy and availability of industrial space are at historic lows. The vacancy rate in the Inland Empire is down to 4.7 percent according to the Aug. 2 Co-Star Marketing Report. This is in sharp contrast to recession-era highs of almost 25 percent. The second quarter report from Lee & Associates for manufacturing and distribution buildings in southwest Riverside County reports a vacancy rate of only 1.2 percent.
“We applaud the vision and perseverance of Rod and his team,” Lake Elsinore Mayor Bob Magee said. “They have dealt with the recession, the Army Corps of Engineers, County Flood Control and the fairy shrimp. These are people with the entrepreneurial spirit, guts and blood. They have a great team and are investing their own money.”
Consumer activity in e-commerce is driving urban last-mile demand for warehouse and distribution space. Locally, Wayfair recently occupied 1,224,874 square feet in the Perris Logistics Center; Wolverine Worldwide leased 720,000 square feet at the Crossroads Logistics Center; Amazon opened a warehouse distribution center in 777,620 square feet at Pioneer Logistics Center. Indeed, according to Marcus & Millichap, e-commerce growth is driving 24 percent of all leasing activity.
“People ask me ‘Why Lake Elsinore?’” Oshita said. “And I reply ‘Have you seen the I-15 during rush hour?’ If people had the opportunity to get off at Central for work, we could affect the quality of life. This is more than building buildings, it’s about creating local jobs for the community, providing affordable facilities for companies to expand warehousing, distribution and manufacturing, taking advantage of an existing labor pool and supporting the local economy.”
Consequently, the low vacancy rates are driving rental rates up. According to commercial real estate firm Kidder Matthews, the base square foot industrial lease rates for the fourth quarter were 78 cents in Los Angeles, 76 cents in Orange County, $1.03 in San Diego County and 58 cents in Riverside County. Despite rising rates for six consecutive years, the Inland Empire’s attraction is that it offers advantages in lower rent price as well as the availability of larger warehouse and distribution space and the land to expand.
“Commercial and industrial growth is moving south from Ontario and Corona as they run out of land to southwest Riverside County,” Michael Strode, senior vice president for Lee & Associates said. “And this growth will be exploding in this area. This area has a lot to offer to attract new businesses and expansion. There are numerous excellent transportation options, an available labor pool, lower rent costs and lots of retail and recreational opportunities. Developers are coming onboard to meet the demand and our company is well-positioned to responsively market the space.”
According to Jones Lang LaSalle, the real estate investment management company, the top five areas in the country, which accounts for more than half of new development starts in the first quarter of 2017, are Dallas, Inland Empire, Philadelphia, Denver and Atlanta. The Statistics Portal ranks the Inland Empire as one of the top 15 areas in the country for industrial property growth and set their buy recommendation at 46 percent and their hold at 38 percent.
Logistics jobs within Riverside County have increased in the past 10 years from 9,000 to 30,000.
“The city is very excited to see Phase I near completion,” Grant Taylor, community development director for the city of Lake Elsinore, said. “Lake Elsinore has experienced significant growth leading to demand for commercial and industrial business that provides jobs and services to the community. We appreciate developer Rod Oshita staying the course through years of challenges with the economy, site constraints and various agencies. We look forward to assisting Mr. Oshita with Phase II of the project.”
“We signed the first listing for this project in 2006,” Larry Null, senior vice president for Lee & Associates, said. “Since then, we’ve had 22 six-month extensions. Our marketing team is here to make deals, and we’re ready to go.”
For more information on these properties and projects, contact Lawrence Null (951) 276-3616, Charley Black, (951) 445-4507, Gordon Mize (951) 445-4504, Michael Strode (951) 445-4508 or Justin Null (951) 276-3634 at Lee & Associates, www.lee-associates.com.