A three-building commercial complex in Santa Ana will be torn down and replaced by a distribution facility, joining a growing field of logistics buildings sprouting along the southern stretch of the 55 freeway.

Terreno Realty Corp. paid $14.8 million for the property at 1720 E Garry Ave. and plans to spend $40.6 million converting the site into a 91,500-square-foot, rear-load distribution building.

The three buildings, which span a combined 105,558 square feet, sit along the southeast side of the freeway, not far from the Dyer Road exit. The complex is leased to a variety of tenants.

Terreno, which owns properties in the Los Angeles area and five other coastal metros, says it already has secured a tenant for the entire facility, describing it only as “a provider of temperature-controlled life sciences supply chain solutions.”

The redeveloped site, which will include 145 parking spaces, should be completed by early 2025.

The industrial trend has gained traction in Santa Ana, which has a large cohort of older office and commercial campuses that are struggling to maintain tenants. In May, we reported the owner of a two-building campus in Santa Ana is going to demolish the recently renovated Elevate@Harbor, headquarters of Optima Tax Relief.

Ready for the wrecking ball: Kearny Real Estate Co. plans to tear down this newly renovated office complex in Santa Ana and build an industrial logistics center on the land. Tenants are leasing just 55% of the 200,000-square-foot complex. (Photo by Leonard Ortiz, Orange County Register/SCNG)

Kearny Real Estate Co. and Dune Real Estate Partners are collaborating on a 163,000-square-foot industrial facility that will replace the mid-rise Elevate@Harbor at 3130 and 3100 S. Harbor Blvd. Kearny bought the campus for $34.8 million in 2018 and spent a year on a “multimillion-dollar renovation,” the company said.

“Tenants have made changes to how they’re occupying space, and therefore, they are right-sizing or are generally downsizing how much space they use,” Kevin Bender, JLL’s executive managing director in Los Angeles, told staff writer Jeff Collins in a July story on the office conversion trend. “That, coupled with tenants that are deciding to vacate altogether, … (is) driving the increase in vacancy across most product types.”

Property owners are selling their stakes to industrial developers such as Kearny and Dermody Properties. The Reno-based firm last year bought the vacant Ricoh campus along the 55 freeway for a reported $88 million. Dermody is in the final construction stages of LogistiCenter at 55, which includes two tilt-up warehouses that span a combined 311,770 square feet.

J.C. Casillas, managing director of research at NAI Capital, says the conversion trend is only logical as office rents sag thanks to the work-from-home pivot.

“This trend reflects a continued shift toward repurposing obsolete or vacant office buildings, especially in market areas close to transportation corridors,” Casillas said via email on Wednesday. “It is logical, considering the growing logistics market, since the city of Santa Ana is well-connected to Los Angeles through its namesake, the I-5 or Santa Ana Freeway, as well as the CA 55 and I-405 Freeways.”

Orange and Los Angeles counties have lost roughly 250,000 commuters since the pandemic began as more employees continue to work from home, according to U.S. Census data.

Casillas said an early look at the third-quarter vacancy rate for industrial space in Santa Ana is a low 1.9%.

Industry people

Luis Porrello has been promoted to California district leader at WSP, an engineering firm. Based in the firm’s Irvine office, he is responsible for the firm’s business performance and client engagement across the state. He previously was WSP’s West region development director. The company designs for buildings, transportation, energy, water and environment markets.

Real estate transactions, leases and new projects, industry hires, new ventures and upcoming events are compiled from press releases by contributing writer Karen Levin. Submit items and high-resolution photos via email to Business Editor Samantha Gowen at sgowen@scng.com. Please allow at least a week for publication. All items are subject to editing for clarity and length.

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