Much of Orange County’s land, which once transitioned from agricultural to industrial uses, is morphing again. Large commercial swaths of Anaheim and Irvine, as well as smaller sections of other cities, are being remade by residential developers. Amid a housing crunch, they are accelerating the transformation of older industrial sites into housing. The question some are asking: Just how much industrial space is the county going to lose?

Parker Hannifin’s former plant site in Irvine: Lennar redeveloping for housing, retail

The answer may depend on the popularity of high-rise housing, said Steve Beck, a senior vice president with GMAC Commercial Mortgage Corp. in Irvine, who has been making loans to industrial owners and developers for 25 years.

Beck said if the many condominium towers planned or under construction in Irvine and Anaheim prove popular, more are likely to follow, taking additional industrial space off the market.

“Where do you see a luxury condominium high-rise, with an industrial building next door?” he said.

The county’s base of 213 million square feet of industrial space isn’t shrinking, at least so far, as a result of housing development, according to Jerry Holdner, vice president of market research with Woodland Hills-based Voit Cos.

The loss of industrial space to housing and shops is being offset by its growth in other areas, such as the Irvine Spectrum, according to Holdner.

In addition, initial plans for the redevelopment of former El Toro and Tustin Marine bases call for some commercial space, including industrial buildings.

Still, the largest housing developer active in the Platinum Triangle area of Anaheim—Miami’s Lennar Corp.—has yet to begin razing industrial buildings there.

The Aliso Viejo office of Lennar has bought the largest chunk of the Platinum Triangle and plans about 3,800 condominiums and apartments.

In all, the Platinum Triangle sports 5.8 million square feet of industrial space, roughly 240 buildings, according to Voit. That’s 11% of all industrial space in Anaheim.

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Some portions of the Platinum Triangle are set to remain as industrial space.

Redevelopment is further along in the commercial hub near John Wayne Airport, known as the Irvine Business Complex. There are 26 housing projects under construction or nearing city approval in the area.

Those projects total 165 acres.

And more housing is planned.

Several area projects are on vacant land, according to Timothy Strader Jr., president of Irvine’s Starpointe Ventures, which has been helping several developers rezone projects.

In some cases the land was zoned for commercial space and in others, such as Park Place in Irvine, there was existing residential entitlement, Strader said.

A few sites include larger, older industrial buildings and some office buildings, he said.

Big Irvine Redevelopment

One of the largest redevelopments under way is the 43-acre former Parker Hannifin Corp. campus at Jamboree Road and Michelson Drive.

The site used to total 400,000 square feet of industrial and office buildings used by Parker Aerospace, a unit of Parker Hannifin.

After Parker Aerospace moved local operations to the Irvine Spectrum a few years back, the site was in limbo until homebuilder Lennar bought a stake in it.

Lennar has razed all the buildings there and plans about 1,400 condominiums, including two high-rises.

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The governments of Anaheim and Irvine are playing an active role in the redevelopment of commercial space as housing.

They have designated specific areas where it’s OK to rezone an industrial property. Other cities, such as Lake Forest and Aliso Viejo, are taking it on a case-by-case basis.

City officials say they are not using eminent domain and merely are attempting to imprint some order on the strong demand for more housing.

They argue there is a natural evolution occurring that began decades ago.

The popular commercial hub near John Wayne Airport, for example, once was primarily industrial space. Ritzy office buildings came later with growth in financial and professional services companies and law firms.

Eventually, a few higher-end apartment projects sprang up to house some of the professionals in the area.

Now housing developers simply are accelerating the process, city officials say.

In any case, the type of industrial buildings being built these days often doesn’t coincide with the type being lost to housing developers.

New construction is tilted heavily to buildings for sale, especially smaller buildings, according to brokers and developers.

The result: Rents are going up, according to Jeff Cannon, corporate managing director with Studley Inc. in Irvine.

He said future rental rate growth, which appears likely, could lead to a larger gap between costs here and in the Inland Empire.

Rents there aren’t projected to climb as much, he said. A greater disparity in rents could lead to more industrial users abandoning OC for cheaper land inland, he said.

The average rent for pure industrial space in the county right now is 61 cents per square foot per month, according to Voit. That should hit a record rate of 65 cents by the end of the year, for growth of nearly 7%, according to Voit.