The Orange County retail market ended 2013 with improving market fundamentals as tenant demand and overall activity increased.
Retailers have been actively absorbing the premier, class A retail space in the county.
The increased activity during the fourth quarter translated into 160,090 square feet of positive net absorption, bringing the year’s net absorption to 355,354 square feet.
The West Orange County submarket contributed the majority of the absorption, recording 77,993 square feet during the quarter and 136,941 square feet for the year.
The county’s vacancy rate, due to the steady momentum of activity, dropped from 5.5% in the third quarter, ending the fourth at 5%. Year-over-year, it declined 9.1%.
The Central Coast submarket held the lowest vacancy rate, at 3.3%. The South Orange County submarket followed closely at 4.1%.
The Central Orange County submarket recorded the highest vacancy rate in the fourth quarter: 6.5%.
The net absorption remained positive, and the overall vacancy continued to decline, but the average asking lease rate for the county dropped 15 cents in the fourth quarter to $2.09 per square foot. That’s due to premier space being leased, leaving the less-expensive, class B and class C space on the market.
The retail market’s lease rates should start getting pushed upward with the lack of new retail development and as tenant demand increases and vacancies continue to drop.
Construction continues on a nearly 481,000-square-foot regional center in Buena Park. The Source will include shopping, dining and entertainment and is due to be completed in October.
There is also a 100,000-square-foot Walmart under construction in Garden Grove that’s expected to be complete this quarter.
But the market continues to benefit from the lack of development as tenant demand continues to absorb current availability.
The retail market has a long way to go before its market fundamentals reach prerecession levels, but the overall outlook remains positive as demand remains steady.
Analysis provided by CBRE Research
