Orange County’s industrial sector had a promising 2005 marked by consistently strong levels of activity.
The fourth quarter also yielded positive statistics that suggest a healthy market. Combined with attractive and efficient living conditions, modern buildings and a strong labor base, OC continues to be a lucrative and ideal location for investors and developers.
The demand for space is ongoing, and OC is adapting and growing at steady levels. As it stands, there is more than 1 million square feet under construction, an 8% increase from a year ago.
After accumulating more than 1.1 million square feet of positive net absorption in the third quarter, OC’s industrial market saw another 38,439 square feet of positive net absorption in the fourth quarter.
This has contributed to another tight vacancy rate of 3.5%, bringing the total amount of vacant industrial space to 8.7 million square feet.
Net Absorption
OC has posted positive net absorption for two quarters in a row. While the fourth quarter tapered to end at positive 38,439 square feet, the accompanying low vacancy and availability rates are suggestive of a tight market.
North and West counties saw positive net absorption of 259,222 and 202,212 square feet, respectively.
The John Wayne Airport area and South County had net absorption of negative 311,787 square feet and negative 111,208 square feet, respectively.
The manufacturing and warehouse sector experienced a positive net absorption of 83,631 square feet, while the research and development sector ended at negative 45,192 square feet.
North County saw positive net absorption of 233,278 square feet and 25,944 square feet in both the manufacturing and warehouse, and research and development sectors, respectively.
West County’s manufacturing and warehouse sector improved from the third quarter’s negative absorption. It ended the fourth quarter at 216,912 square feet.
Vacancy
Strong gross activity posted by OC in the fourth quarter kept vacancy and availability rates low.
As it stands, the vacancy rate is 3.5%. This amounts to 8.7 million square feet of vacant space in an industrial base of more than 245 million square feet. This represents two consecutive quarters of vacant square feet less than 9 million square feet.
The vacancy rate in the manufacturing and warehouse sector is 3.2%. At 2.8% and 2.7%, vacancy for manufacturing and warehouse buildings in North and West counties sustained the lowest level.
The research and development sector saw a slight increase of 0.1% to end at 5%. Within the research and development market, the airport area had the lowest vacancy rate of 2.9%. At slightly more than 15.4 million square feet, the availability rate remains at 6.3% at the end of the fourth quarter.
Asking Lease Rates
The diminishing supply of industrial space, coupled with the ongoing demand, have driven overall average asking lease rate to remain high. At 62 cents per square foot, average rents have increased for two consecutive quarters.
The manufacturing and warehouse, and research and development sectors both saw 1 cent increases to end at 57 cents and 82 cents, respectively.
The airport area saw the highest spike in asking rents to end the fourth quarter at 64 cents. This represents a 6-cent increase from the previous quarter.
The average asking rates in South County were the highest,ending at 84 cents per square foot. North County’s rates were the lowest at 51 cents.
Construction
There were 20 buildings totaling 1 million square feet under construction in the fourth quarter. The manufacturing and warehouse sector accounts for about 93% of construction.
West County accounts for about 45% of construction square feet, followed by 31% in North County, 18% in the airport area and 6% in South County.
The fourth quarter saw 185,604 square feet completed in the airport area. This was followed by 52,908 square feet completed in West County, and 10,748 square feet completed in North County.
Data and analysis provided by CB Richard Ellis Research.
