Orange County has come a long way from the lows of 2009 in the manufacturing and warehouse market.
While the industrial market has taken its share of hits throughout the recession, it remains fundamentally intact as vacancy and absorption continue to be stronger than the national average.
Statistics reveal that activity in sales by people buying space for their businesses are trending toward stability as companies take advantage of lower pricing to buy rather than lease their space.
Conversely, uncertainty in the leasing sector continues.
The county’s manufacturing and warehouse market has slightly more than 207 million square feet. In the first quarter, vacancy increased to 4.8%, an increase of 11.6% from the previous year’s rate of 4.3%.
The average asking lease rate declined 7 cents per square foot, a 12% drop from the fourth quarter.
Absorption was a more positive indicator of an improving market, as the first quarter showed 906,489 square feet of absorption, compared to the negative 521,146 square feet recorded in the fourth quarter.
This was the first time in the previous seven quarters—dating back to the second quarter of 2008—that the market’s seen positive absorption.
In the first quarter, OC saw a slight vacancy decrease to 4.8%, down from 5.3% in the fourth quarter, while the availability rate increased to 11.3% from 11.1%.
This decrease in vacant space was mostly driven by aggressive pricing for buildings smaller than 100,000 square feet, attractive financing and a lack of high-quality space.
Sale prices and lease rates fell compared to pricing at the end of 2009. The average sale price for the first quarter was $127 per square foot, down from $132 in the fourth quarter. The average asking lease rate also decreased, but only by a penny to 55 cents per square foot.
Gross activity, not including lease renewals, was 2.72 million square feet, which is significantly higher than 2009’s quarterly average of 1.79 million square feet.
The largest lease in the county in the first quarter was Solaris Paper Inc.’s expansion of 174,967 square feet at 6750 Artesia Blvd. in Buena Park. The largest sale was South Coast Transportation & Distribution Inc.’s $12.25 million purchase of a 187,000-square-foot distribution facility on Raymond Avenue in Fullerton.
Though there are positive signs of recovery at long last, challenges persist. OC’s unemployment rate is still in the double digits, port activity for export traffic/containers continues to decrease and consumer confidence lacks stability. Until these challenges are worked through in a meaningful way, improvement in OC’s industrial sector will be slow, but hopefully steady.
Kim is an associate in the Anaheim office of CB Richard Ellis Group Inc.
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