RETAIL MARKET
Vacancy Rate Falls, Absorption Persists, Lease Rates Rise
Retail real estate has remained among the market’s best performers during the recent slow economic period.
Although retail sales struggle to maintain positive momentum, retail real estate still is performing well.
Since the beginning of 2001, the non-anchor retail vacancy rate in Orange County has been tightening, lease rates have continued to climb and annual absorption has remained positive.
These trends continued through the first half of 2003.
Vacancy
The vacancy rate for non-anchor retail space fell again in the second quarter to 5.9%, down from 6.2% the previous quarter.
Vacancy tightened in all center types with exception of specialty centers, where about 26,000 square feet of negative absorption pushed the vacancy rate up to 12.7%.
Absorption
Demand for retail space has been strong through the first half of the year, totaling 157,790 square feet in the period.
About 132,000 square feet were absorbed during the second quarter.
The neighborhood center sector again was the strongest, accounting for 94,834 square feet of positive activity through the first two quarters.
Community centers also saw two quarters of positive net absorption totaling 68,846 square feet.
Lease Rates
The demand for quality retail space in Orange County continues to drive average asking lease rates up, as few buildings remain available in the market.
The average asking lease rate jumped another five cents higher to $1.88 per square foot in the quarter.
Since the second quarter last year, the average asking rent for Orange County retail is up 6%.
Central Coast and South County are the most expensive markets, with average asking rents 19% higher than the overall county average.
Construction
One new neighborhood center started construction this quarter in Irvine.
The Quail Hill Village will add about 150,000 square feet of space that includes merchant and service retail operations in addition to both full and quick-service eateries.
The remaining 1.3 million square feet of retail product under construction includes one specialty center in Anaheim and three community centers in La Habra, Huntington Beach and Irvine.
One new specialty center completed construction during the second quarter; the Bluffs in Newport Beach has 51,534 square feet of restaurants and service businesses. It was 60% occupied when completed.
Analysis provided by CB Richard Ellis’ information management department.
