Activity in the Orange County industrial market slowed in the third quarter, with approximately 2.1 million square feet of gross activity.
That was down was down by 40%, or 1.4 million square feet, from the prior quarter. Net absorption for the third quarter totaled negative 188,750 square feet, an improvement from the second quarter’s net absorption of negative 390,581 square feet.
The overall availability rate declined to 7.3% from 7.4% last quarter, while the vacancy rate remained unchanged at 3.8%. Availability in the OC industrial market has been steadily declining since its 11% high in the second quarter of 2010. During the same period, the vacancy fluctuated between 3.5% and 4%.
The average asking lease rate held steady at 63 cents per square foot at the end of the third quarter, while the average asking sale price dropped from $127.84 per square foot to $126.73 per square foot. Average asking sale prices have remained above $125 per square foot throughout 2012.
Development in OC continued in the third quarter with 110,350 square feet still in the construction phase. That includes one speculative manufacturing and warehouse building in Brea totaling 84,350 square feet that broke ground in the first quarter of 2012 and a 26,000-square-foot build-to-suit in the Irvine Spectrum. Two phases of planned construction on the Anaheim Concourse will include eight buildings totaling 840,000 square feet.
OC’s overall asking lease rate remained unchanged from the second quarter at 63 cents per square foot. Asking rents range from a low 49 cents per square foot in North Orange County, to a high 82 cents per square foot in South OC.
Overall asking lease rates in Orange County’s industrial market have been steadily ticking upward since the third quarter of last year. The overall asking lease rate has remained above the 60 cents per-square-foot mark throughout 2012.
The average asking lease rate for the manufacturing and warehouse sector remains the same as the previous quarter as well, ending the third quarter at 56 cents per square foot. The average asking lease rate for the research and development sector is back up to 81 cents per square foot after falling to 79 cents per square foot in the second quarter.
The current average asking lease rate now stands 3 cents higher than the third quarter of 2011, representing 5% growth year-over-year. Average asking lease rates fell to their lowest point in the third quarter of 2010 at 57 cents per square foot but have been gradually increasing since then.
Vacancies
The overall vacancy rate for the OC industrial market ended the third quarter at 3.8%. This represents a year-over-year decline of 3% yet remains the same as the previous quarter.
The vacancy rate for manufacturing and warehouse product dropped from 3.4% in the second quarter to 3.3%. The manufacturing and warehouse vacancy rate has hovered around the 3.3% to 3.4% mark since the fourth quarter of 2011.
The vacancy rate for the research and development sector moved up from the second quarter’s rate of 5.7%, to end the third quarter at 5.9%. Vacancy for the research and development sector has been above the 5% mark throughout 2012.
The South OC submarket posted the highest vacancy rate this quarter with 5.9%. North OC continues to track the lowest vacancy rate of the county, ending the third quarter at 3%. The Greater Airport Area and West Orange County submarkets ended the third quarter with 4% and 3.8% vacancy rates, respectively.
The overall availability rate has been declining since the second quarter of 2010 when it peaked at 11%. The availability rate for the OC industrial market now stands at 7.3%, representing a 1% decrease from the previous quarter’s rate of 7.4%.
A decline of overall activity occurred in the third quarter which resulted in almost 2.1 million square feet of gross leases and user sales. That represented a 1.4 million-square-foot drop in activity over last quarter.
Analysis by CBRE Group Inc.
