Industrial Market
Orange County’s industrial market finally began to show signs of strength in the second quarter, despite California’s challenging economic climate.
In one of the biggest rebounds since mid-2002, the county posted more than 1.3 million square feet of positive absorption this quarter. Sparked by what seems to be the start of a manufacturing recovery, total industrial activity reached its highest level in five years.
The increased activity in both the manufacturing and warehouse, and research and development sectors effectively brought Orange County’s industrial vacancy down to 5.2%.
M & W; buildings in the John Wayne Airport area saw more than 1.6 million square feet of activity this quarter, nearly doubling the activity of one year ago.
Net Absorption
After six consecutive quarters of negative absorption, OC’s industrial market posted 1.3 million square feet of positive absorption in the second quarter.
With continuing strong levels of activity this quarter, the manufacturing and warehouse sector had more than 617,000 square feet of positive absorption. Research and development space reached 701,475 square feet, up 164.6% from the previous quarter.
The best overall absorption was seen in North County, with 513,682 square feet of positive absorption. The airport area had the largest increase, versus the past quarter.
Vacancy
The amount of vacant square feet of industrial space dropped for the first time since the third quarter of 2002, thanks to the significant level of activity this quarter.
After two consecutive quarters of positive absorption, the research and development market saw another reduction in vacancy to 6.3%. While the lowest rate of total industrial vacancy remains in West County at 4.2%, the South County research and development market boasted a 21% drop in vacancy from the previous quarter.
Lease Rates
For the second consecutive quarter, average asking lease rates for industrial space in OC increased by 1 penny per square foot overall, bringing the current asking rent to 60 cents per square foot.
Asking rates for research and development buildings increased by 1 cent while manufacturing and warehouse buildings saw a 2-cent bump to 56 cents per square foot.
Although South County fell 3 cents to 69 cents per square foot, it remains the most expensive market in the county.
Construction
With 17 industrial buildings completing construction in the second quarter, the amount of industrial space being built in OC decreased to 690,425 square feet.
Manufacturing and warehouse continued to represent the majority of the buildings under construction.
The 521,055 square feet of industrial space completed in the second quarter averaged 20,000 to 40,000 square feet per building. With nearly 1 million square feet planned, signs of a strong economic recovery could cause a surge of industrial construction.
