Lincoln Property and Artemis Make a Major Move in Southern California’s Industrial Real Estate Market

Navigating Southern California’s Industrial Landscape

In a significant development for Southern California’s industrial real estate market, Lincoln Property Company and Artemis Real Estate Partners have successfully acquired Paper Mart’s expansive 250,000-square-foot headquarters in Orange for approximately $67 million. This acquisition, finalized on October 23, 2023, underscores the growing interest among landlords in capitalizing on post-pandemic tenant demand for well-located industrial properties in infill markets. With an acquisition price of approximately $278 per square foot, this deal ranks as one of the largest single-building industrial sales in Orange County within the year.

A Legacy Location

Originally constructed in 1995, the property at 2164 N. Batavia St. has had a storied past. Initially home to liquor distributor Young’s Market Co., it became the headquarters for Paper Mart in 2010 when the family-owned packaging supplier purchased it for $22.2 million. This transaction exemplifies not just a change of ownership but also reflects a strategic move in the real estate market. The sellers, Frick Paper Co. and Frick Family Properties, have negotiated a 12-month sale-leaseback arrangement, allowing Paper Mart time to relocate its operations and accommodate its workforce of over 160 employees.

Paper Mart itself traces its origins back to the 1920s, providing visually appealing yet economically viable gift wrapping and packaging supplies. With an extensive inventory that includes over 20,000 items—ranging from shipping boxes to restaurant takeout containers—the firm has solidified its reputation in the e-commerce space.

Lincoln Property Company’s Expansion Strategy

For Lincoln Property Company, this acquisition stands as its most significant purchase in Orange County since 2022, paralleling its acquisition of the Square on Main office campus in Orange. The firm boasts a vast local portfolio encompassing both office and industrial properties. With over 14 million square feet of commercial space under management in the region, Lincoln aims to leverage this newest acquisition by meeting the escalating demand for flexible industrial space.

A Lincoln executive noted the strategic benefits of the property in anticipating tenant demand, thus enhancing their investment and management capabilities. The partnership with Artemis Real Estate Partners marks a welcomed return to collaboration between the two companies after more than a decade apart.

A Joint Venture Fueled by Optimism

Artemis, based in Chevy Chase, Maryland, is keen on its investment in Class A infill industrial assets. Jonathan Rainford from Artemis highlighted that the Orange County market continues to outperform, particularly regarding facilities featuring modern infrastructure. Their collaborative effort aims to upgrade the Paper Mart facility over the upcoming year, preparing it for lease on the open market for the first time.

With features such as 36-foot clear heights, 35 dock-high loading doors, full skylights, ESFR sprinklers, and energy-efficient LED lighting, the property is more than just an acquisition; it’s a canvas for future tenant flexibility and operational efficiency. Jeff Read of Newmark has been enlisted to manage leasing of this premium space.

Shifts in Owner-User Transactions

The Paper Mart sale is emblematic of a noticeable trend in Orange County—the rising prevalence of owner-user transactions. Repeatedly throughout October, multiple companies have offloaded properties they previously occupied as headquarters. Notable transactions include HdL Cos.’ recent divestment of its 80,000-square-foot building in Brea for $19.5 million and the sale of Howard’s Appliances’ former 31,000-square-foot headquarters in La Habra for $6 million.

These transactions highlight a transformative mindset among businesses, which are increasingly viewing their real estate holdings as tangible assets to monetize, rather than as static operational necessities. Consequently, this evolving perspective could dramatically reshape the commercial property landscape, fostering a trend toward more flexible leasing arrangements.

Implications for the Future of Industrial Real Estate

As the market transitions, firms like Lincoln Property and Artemis are well-positioned to take advantage of these shifts in tenant needs and corporate strategies. The Paper Mart acquisition not only illustrates continued investor enthusiasm for industrial spaces in sought-after regions but also signifies a broader realignment in how businesses regard real estate.

The focus on flexibility and modern infrastructure caters to a changing workforce, increasingly driven by remote capabilities and a need for adaptable workspaces. This could pave the way for innovative leasing strategies that align with evolving corporate identities and operational models.

In conclusion, as Southern California’s industrial market thrives, strategic partnerships and acquisitions—like the one between Lincoln Property and Artemis—will play a crucial role in meeting demands while adapting to post-pandemic realities. With various players in the market re-evaluating their real estate assets, the future of industrial real estate looks promising and well-aligned with contemporary business dynamics.