Mild recovery seen in commercial property

Commercial landlords will see falling vacancies and rising rents over the next two years, but the recovery will be mild in all but the apartment sector, according to the National Association of Realtors U.S. commercial real estate forecast.

The forecast was during NAR's recent conference in Anaheim. According to the national forecast:

•Office vacancies will fall, but remain the highest of all the commercial sectors through 2013. The vacancy rate is projected to fall to 16.3 percent in 2012, down from 16.6 percent in the third quarter of this year. In 2013, office vacancies will drop further to 15.9 percent. Office rends are projected to increase 1.7 percent in 2012 and 2.4 percent in 2013.

•Industrial vacancies will drop from 12.7 percent this past summer to 11.9 percent in 2012 and 11.1 percent in 2013. Industrial rents are projected to increase 1.8 percent in 2012 and 2.3 percent in 2013.

Empire Academy will lease this 12,000 SF office property located at 1544 E. Warner Avenue in Irvine, Calif.

•Retail vacancies will drop from 12.9 percent this past summer to 12.2 percent in 2012 and 11 percent in 2013. Rents are projected to rise 0.7 percent in 2012 and 1.4 percent in 2013.

•Apartment vacancies will drop from 5.5 percent this past summer to 4.6 percent in 2012 and 4.5 percent in 2013, while apartment rents are expected to go up 3.5 percent next year and 3.8 percent more in 2013.

NAR Chief Economist Lawrence Yun based his forecast on projections that the U.S. economy will avoid recession and add 3 million to 4 million jobs in the next two years.

Prices for sales of commercial real estate buildings has bottomed out, Yun said. He noted also that the stock market has largely recovered from the 2008 crash and that corporations have huge cash reserves. That's coupled with expanding international trade and bargain shopping by international investors who are buying homes and buildings here.

Still, Yun said, the economy is underperforming. Depressed condition in financial and small business sectors also will continue to negatively impact commercial real estate, he said.

STUCK ON 20

California ranked 20th in SiteSelection.com's annual ranking of state business climates for new factories and offices -- the same as last year's results.

California did make some progress -- it was ranked 11th in SiteSelection.com's survey of executive's impressions of a state for business relocation. That was up from 20th a year ago. The survey counts for half of the ranking score.

State-by-state data, which makes up the other half of the rankings wasn't as kind to California:

•2010 new plants: California ranked 15th.
•New plants per capita: California ranked 47th.
•2011 new plants: California ranked 9th.
•Competitiveness: California ranked 37th.
•Tax climate: California ranked 49th.

Overall winner was Texas, followed by Georgia, North Carolina, Virginia and South Carolina.

MAKE-UP LEASE

The Empire Academy make-up artistry school signed a 10-year, $1.4 million lease for a 12,000 square feet building at 1544 E. Warner Avenue in Irvine. Empire is relocating from Costa Mesa and will fill their new home building.

Michael Hartel of broker Voit Real Estate Services that represented the landlord, REEF Brookhollow: "Vocational schools are excellent tenants, especially in this economy, when people are working to re-train themselves in order to find new jobs."

 

THE DEAL SHEET

Bisnow.com
“The Deal Sheet”
August 16, 2011
Featured: Kevin Turner and Michael Hartel

Upscale candle and fragrance maker Voluspa is moving its headquarters and operations from Lake Forest to Irvine after signing a lease for a high-profile industrial building near John Wayne Airport.

The fast-growing company, which was also operated under the Flame & Wax Inc. name, inked a lease to take over 2900 McCabe Way. The 84,816-square-foot building in Irvine is just off the east side of San Diego (I-405) Freeway and Jamboree Road.

The move nearly triples Voluspa’s space.

The building, owned by Beverly Hills-based Crown Associates Realty, was previously used by Costa Mesa-based surfwear maker Hurley International LLC as a distribution center.

The five-year deal is valued at just under $3 million, according to brokers with the Irvine office of Voit Real Estate Services Inc., which represented Crown.

That works out to monthly rents of about 58 cents per square foot.

Voluspa is expected to move to its new location by October.

Voluspa’s fragrance-laden candles have gotten plenty of exposure in style and entertainment magazines, and have been linked to a number of celebrities.

Celebrities who’ve been sighted using the company’s products include Megan Fox, Victoria Beckham and Halle Berry, among dozens of others, according to Voluspa’s website.

The company, named for the “Scandinavian goddess of wisdom,” had been operating out of approximately 27,500 square feet of space in Lake Forest since 2006.

All the company’s candles are made on site, and increasingly busy operations at Voluspa’s warehouse are said to have cramped operations. The company’s yard area often fills to capacity with materials, said Guy Laferrara, chief executive and partner with Lee & Associates-Irvine, which represented Voluspa in the lease.

The new location, which includes about 9,000 square feet for offices and some lab space, should give the company room to expand operations, Laferrara said.

The company employed about 50 workers as of early last year.

Voluspa has been averaging sales growth of roughly 20% the past few years. Its sales in 2009 were estimated at about $10 million.

The company sells candles that run from $15 to $25. They’re sold at boutique retailers such as Fred Segal of Los Angeles, and a roster of larger chains that includes New York-based Bloomingdales Inc. and Saks Fifth Avenue, and Anthropologie, a unit of Urban Outfit-ters Inc. in Philadelphia.

House Blend

The candles use a coconut wax blend and are designed not to smoke when burning. They can cost twice as much as competitors’ products, but they’ll burn twice as long, the company says.

Voluspa’s founders, Troy and Traci Arntsen, created their first scented candle in their Costa Mesa kitchen in 1999.

He is the company’s chief executive.

She serves as creative director and has come up with more than 200 scents for Voluspa.

Along with candles, the company’s been expanding the past few years into a line of home fragrances.

The company outbid a number of other potential tenants in order to grab the Irvine space, according to Kevin Turner, a senior vice president with Voit who worked on the deal with colleague Michael Hartel.

Increased Demand

Hurley, a unit of Nike Inc., left the building earlier this year, consolidating its warehouse operations in an Inland Empire building already leased by Nike.

After Hurley left, the building was marketed for about 45 days and received six proposals, according to Turner.

That’s a reflection of the increased demand of late for buildings in the 100,000-square-foot range, especially in the airport area, Turner said.

Crown Associates has owned the McCabe property since the early 1990s. At the peak of the last housing boom, the site was eyed as a possible residential development by Los Angeles-based KB Home.

Tower Tale

KB Home filed plans with the city of Irvine to develop 2900 McCabe, a 314-home project that would have included a 16-story tower.

Those plans were quickly shelved as the housing market soured, and by 2007 KB Home had fallen out of escrow to buy the 4-acre site.

Crown Associates earlier this year was marketing the existing industrial building for sale, at a price of about $14.8 million, or $175 per square foot, according to data from CoStar Group Inc.

The building’s no longer up for sale, according to Turner.