CIP Real Estate, an Irvine-based firm specializing in industrial properties, has acquired more than $200 million worth of "small bay" industrial and flex office complexes over the past three months. The company's chief executive, Eric Smyth, stated that this acquisition pace is expected to continue.
Among its recent purchases, CIP Real Estate acquired the Walnut Tech Business Center. This complex, located at 398 Lemon Creek Drive in Walnut, comprises 11 buildings totaling 200,000 square feet. CIP purchased the property from Boston-based AEW Capital Management for $60.65 million. The center includes 109 suites, with individual spaces ranging from 640 to 8,400 square feet. At the time of sale, the property was 92% leased, according to CIP officials. CoStar records indicate CIP paid approximately $303 per square foot for the acquisition. Financing for the purchase included a $42.9 million first mortgage provided by City National Bank.
JLL Capital Markets' team, including Patrick Nally, Evan Moran, Chad Solomon, Shae Vomund, and Lauren O’Neill, represented AEW in the sale. JLL’s Debt Advisory team, led by Kevin Mackenzie, Peter Thompson, Kyle White, and Colter Smith, arranged the financing for CIP.
This Walnut acquisition follows other recent CIP purchases in Dallas, South Florida, and Atlanta, which together have pushed the company’s deal volume above $200 million in the past 90 days. Smyth indicated that CIP plans to maintain this rate of acquisition through 2027 and 2028, assuming no significant changes in interest rates.
"Small bay" properties, also referred to as light industrial business parks, are distinct from large, single-tenant distribution centers. They are divided into multiple smaller spaces, typically under 30,000 square feet each, serving various businesses. One real estate executive described this sector as the "apartment space" of the industrial market.
Data from CBRE shows strong demand for these types of properties, particularly in Orange County. Vacancy rates for industrial units under 10,000 square feet are currently near 1%, while spaces under 24,000 square feet have a 2% vacancy rate. In contrast, larger industrial big-box sizes, those over 100,000 square feet, have a vacancy rate of about 11%. Smyth noted that this strong demand comes from both tenants and potential buyers.
The challenge in this market, Smyth explained, is the difficulty in developing new small bay properties. New construction for this property type in Southern California largely ceased around the early 1990s. Land availability, zoning restrictions, and high construction costs make new development difficult, especially when competing with residential projects that can support higher land costs due to denser building possibilities. Smyth stated, "You can’t reproduce them anymore. You don’t have the land. You can’t get the zoning. The construction costs don’t make sense."
CIP Real Estate believes that the combination of limited supply and consistent demand from small industrial users will lead to stronger rent growth compared to other property types. Smyth said that, particularly in Southern California, the focus is on predicting demand, as supply is constrained.
Founded in 1995, CIP owns and manages more than 12 million square feet of property across the West Coast, Texas, and the Southeast, with its industrial portfolio valued at over $2.5 billion. The Walnut Tech Business Center will join CIP's existing Southern California portfolio, which includes business parks in Anaheim, Orange, Carlsbad, Riverside, Ontario, and the Upland-Claremont area.
Following its acquisition, CIP plans to invest an additional $3.5 million into renovating the Walnut Tech Business Center. Smyth outlined that these renovations will include new roofing, air conditioning systems, landscaping, signage, and other exterior upgrades. Despite the competitive market and limited supply, the company maintains a strong interest in acquiring more small and mid-sized bay properties across its target markets, including Southern California, when opportunities arise.