The overall Greater Airport Area industrial real estate submarket performed well in the first quarter, and market fundamentals were strong.
The market, which includes the cities of Costa Mesa, Irvine, Fountain Valley, Santa Ana and Tustin, consists of just over 2,000 buildings totaling approximately 69.1 million square feet. It’s broken down into research and development and manufacturing and warehouse property types. The majority of the submarket is made up of the latter, which accounts for approximately 79% of total inventory.
Vacancy Rate, Absorption
The overall vacancy rate in the market increased from 1.1% to 1.4% at the end of the quarter, though vacancy rates decreased by 22% from the 1.8% recorded in the first quarter of 2015.
Vacancy levels in the manufacturing and warehouse segment increased from 1.1% to 1.5%, while the research and development market increased from 1.1% to 1.3%.
The market generated negative net absorption in the amount of 31,360 square feet. It’s experiencing an increase in property conversions to residential, particularly in Irvine. That makes it challenging to find quality industrial space.
The overall average asking lease rate experienced a 6.9% year-over-year increase from 72 cents per square foot to 77 cents per square foot.
The average asking rent for research and development facilities was $1.44 per square foot, up 60% from a year earlier, whereas the manufacturing and warehouse asking rent increased to 74 cents per square foot, up 7.2% year-over-year.
The market continues to tighten due to increased demand from users, and we predict that asking lease rates will continue to increase throughout the year.
Sales Prices
Asking sale prices also continued an upward trajectory during the quarter as the price for an industrial building in the market increased to $211.44 per square foot, up $55 per square foot, or 35%, over the asking sale price recorded 12 months earlier.
The average asking sale price for manufacturing and warehouse properties was $208.45 per square foot, while research and development properties had an average price of $220.63.
We project that sale prices will continue to increase this year as owner-users keep gaining confidence in their businesses and interest rates remain near record lows.
Analysis provided by CBRE Research
