With more than 1,000 buildings totaling more than 42 million square feet of space, Orange County’s research and development sector accounts for roughly 17% of the region’s total industrial base.
The sector saw a slow second half of 2009, with increased vacancy levels and decreased rents.
In the fourth quarter, research and development buildings saw 229,026 square feet of absorption, marking a 16% decline from the activity recorded in the fourth quarter of 2008.
The overall availability rate saw another increase this quarter, while the vacancy rate declined slightly. As it stands, there is more than 2 million square feet of vacant research and development space, yielding a decreased vacancy rate of 5.1%.
The change in vacancy represents a 6% decrease from the third quarter and a 5% increase from a year earlier. The sector’s availability rate currently stands at 9.9%, rising slightly from 9.6% in the third quarter and up 16% from the fourth quarter of 2008.
Year-to-date, there has been more than 672,000 square feet of negative absorption. The majority of the negative absorption was concentrated in the South County submarket, which was responsible for more than half of the vacated space.
The average asking lease rate currently stands at 94 cents per square foot. While dipping 2 cents from the third quarter, this new asking rate represents a 17-cent decrease from a year earlier.
The growth of new research and development space has come to a halt, much like what the manufacturing and warehouse market has done. The OC industrial submarket added one building this year to its inventory, which was a 52,840-square-foot, built-to-suit building in Fountain Valley.
Many business decisions to expand or relocate have been put on hold until an economic balance can be achieved—resulting in decreased demand for new space. Because of this, developers also are putting their plans on hold to build new space.
Data and analysis provided by CB Richard Ellis Group Inc.
