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Thursday, Mar 28, 2024
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OC’s manufacturing and warehouse market remained tight in the second quarter

The uncertainty of the economy and the electricity crisis affected real estate decision making in the second quarter. As a result, industrial gross activity in Orange County slowed from the highs seen in previous quarters, although the county still had more than 2.6 million square feet transacted. The manufacturing and warehouse sector was responsible for the large majority (81%) of the total industrial gross activity for the quarter, keeping the vacancy rate extremely low at just 1.8%.

Although leasing activity tapered during the second quarter, sale activity increased as tenants continued to buy rather than lease to derive benefits from stabilizing long-term operating costs. While M & W; building sales rose by 27.3% over the past year, asking sale prices increased by an average of 14% to $84.07 per square foot since the second quarter of 2000. Average asking lease rates dipped 1 cent from the first quarter, to 58 cents per square foot per month, but remained 5% higher than the first quarter last year.

With the vacancy rate so low in the M & W; market, it has become difficult for larger tenants to find sizable quality space. Net absorption for M & W; space ended the second quarter at a negative 145,458 square feet as a result of tenants seeking larger or less expensive space in neighboring markets, such as the Inland Empire. Both North Orange County and West Orange County experienced positive absorption in the second quarter, keeping the vacancy rate in those areas below 1%.

With an M & W; vacancy lower than 2%, construction activity increased to 1.7 million square feet, up from 1.6 million the previous quarter. North Orange County, where the M & W; vacancy rate remained less than 1%, had the most construction activity under way as the second quarter came to a close, with 15 properties totaling more than 700,000 square feet going up. New M & W; product added to the Orange County market in the second quarter included one 15,000-square-foot building in Fullerton, and three new South Orange County properties totaling more than 50,000 square feet.

Analysis provided by CB Richard Ellis’ Global Research and Consulting.

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