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Thursday, Mar 28, 2024
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New Construction Boosted Deals, Vacancy Rates

Strong tenant activity and several new construction deliveries led to another strong quarter for the OC retail market. Demand for space in both new centers as well as in existing centers resulted in more than 570,000 square feet of positive absorption. Although much of the new space added to the market was preleased, the overall vacancy level still rose slightly to 3.2% from 3% in the first quarter.

The county’s average asking lease rates were competitive in comparison to its Southern California neighboring counties, despite experiencing a 4 cent increase to $2.56 per square foot.

OC saw the completion of four centers totaling more than 1.7 million square feet in the second quarter. Among these additions was The District at Tustin Legacy, which is composed of 1.1 million square feet on the former Tustin Marine Base. Nearly 1.6 million square feet of retail space remains under construction and includes such projects as Orchard Hills Village Center, The Strand in Huntington Beach and The Promenade at San Clemente.


Vacancy Rates

Vacancy rates continued to hover below 3.5%, with the second quarter posting a 3.2% vacancy level. This recent rate represented a 7% increase from the previous quarter and is mainly due to the newly constructed projects, which still have some vacant space.

While the Central, North and West counties experienced increased vacancy rates, Central Coast and South County remained unchanged. Despite this latest rise, North County continued to hold the tightest rate of 2.1%, while South County carried the highest rate of 4.4%.

Net Absorption

Demand among tenants remained active into the second quarter and produced 570,010 square feet of positive absorption. Central County experienced the highest level of demand with 367,011 square feet of absorbed space, driven by the new tenants taking space at The District at Tustin Legacy.

Overall, power centers in OC posted 359,436 square feet of net absorption with specialty centers following with 180,701 square feet of absorption. The community center sector saw decreased levels of demand with 14,597 square feet of negatively absorbed space.


Average Lease Rates

In the second quarter, the average asking lease rate increased an additional 4 cents to stand at $2.56 per square foot. This recent growth represented a 2% increase from the first quarter and 4% jump from the same quarter last year.

Meanwhile, the second quarter saw the completion of four centers and one renovation.


Analysis provided by CB Richard Ellis Group Inc.’s research unit.

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