Starting off strong, the Orange County retail market continues to thrive in 2007. Constant levels of demand for retail space resulted in positive 120,936 square feet of net absorption. This increase pushed a decrease in the overall vacancy rate, to 3%.
The average asking lease rate climbed a cent to $2.52 per square foot. Even though it increased, OC’s lease rates are competitive in comparison to its Southern California neighboring counties.
Currently, more than 3.2 million square feet of retail space is under construction and include such projects as Orchard Hills Village Center, The Strand in Huntington Beach, and The District at Tustin Legacy. The Promenade at San Clemente, totaling 75,000 square feet, was the first project to break ground this year. Woodbury Town Center in Irvine completed construction, adding an additional 430,000 square feet to the Central Coast submarket.
Retail spending slowed in the first part of the year, which is typical when following a strong holiday season. Retail sales fell across the board, according to a report.
Vacancy Rates
Following a steady pace, the OC overall vacancy rate decreased to 3% in the first quarter. While the Central, North and West counties experienced a decline in vacancy rates, Central Coast and South County held steady.
North County held the tightest rate, 1.7%, while South County carried the highest at 4.4%. Of the center types, specialty centers continued to have the highest vacancy level, declining to 3.8% this quarter, while strip and power centers held the lowest vacancy rates of 2.8% and 1.9%, respectively.
Net Absorption
The first quarter saw increased demand and posted a positive 120,936 square feet of net absorption.
Across the board, all submarkets within the region experienced positive absorption. Central County experienced the highest level of demand with 71,779 square feet of positively absorbed space, which was concentrated in its power centers. Overall, neighborhood centers posted 49,897 square feet of positive net absorption with power centers following close behind with 41,261 square feet of positive absorption.
Some negative absorption occurred within the strip center sector, which saw decreased levels of demand with 5,225 square feet of negatively absorbed space.
Asking Rents
Although at a slower pace, OC retail rents continued to rise. In the first quarter, the average asking lease rate increased 1 cent to $2.52 per square foot. This recent growth represented a 10% year-over-year rise.
