Despite signs of stabilization through decreases in vacancy and availability rates, the research and development market continues to face the reality of depressed rents and minimal absorption.
Orange County’s research and development sector represents 17% of the county’s industrial base with more than 1,000 buildings and roughly 42 million square feet. The greater airport area and South County submarkets make up the majority of the sector, contributing more than 65% of total research and development space.
The sector saw nearly 464,000 square feet of absorption in the first quarter, more than doubling the activity recorded in the fourth quarter.
As a result, vacancy and availability rates declined from the fourth quarter. Even with 1.8 million square feet of total vacant research and development space in the county, the overall vacancy rate dropped to 4.5% in the first quarter, representing a 6.3% change from the fourth quarter.
The availability rate, which measures total square feet both vacant and occupied on the market, stands at 9.6%. This is down slightly from 9.9% at the end of last year.
As absorption has remained relatively stagnant, asking lease rates throughout the market have continued to decline as landlords compete to fill vacancy.
On average, asking rents for the county are down 9.6% from the previous quarter to 87 cents per square foot.
This dip in asking rents pales in comparison to figures from the previous year in South County where rents dropped 11 cents per square foot, and the airport area, where they dropped 10 cents.
With no new research and development buildings under construction in the county, companies will look to expand or relocate to existing buildings that offer more advantages in the coming years.
Zanolli is an associate in the Newport Beach office of CB Richard Ellis Group Inc.
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
