Industrial Market
The Orange County industrial market saw activity increase and net absorption improve while some markets posted fewer vacancies in the first quarter.
Vacancy Rates
Despite its continued ascent, OC’s industrial vacancy rate slowed from the big increases seen in the second half last year, staying below 5%. The availability rate for industrial space rose to 8%.
West County and the airport area had a tightening of manufacturing and warehouse vacancy in the quarter, dropping to 2.2% and 4.8%, respectively. In the research and development market, West County was the only area in which vacancy dropped, ending the quarter at 10.1%.
Absorption
Net absorption increased 81% in the quarter, an improvement vs. the 3.3 million square feet of negative net absorption seen in the fourth quarter. The number of sales and leases signed during the first quarter jumped 21% from the last quarter, showing that demand for industrial space in the county continues.
In spite of the renewed activity, gross activity square footage is 5% below last quarter’s level, as a majority of the deals were for spaces less than 50,000 square feet. Only one 66,000-square-foot research and development building was sold, while nine larger manufacturing and warehouse deals took place in the first quarter.
Lease Rates
The average asking lease rate for industrial space has fallen by a penny a quarter in the last year, as landlords and owners try to attract new tenants and keep existing ones. In the first quarter, the average asking rent in OC broke just below the 60 cents-per-square-foot threshold for the first time since the second quarter of 1997.
Within the industrial sector, the average asking lease rate for research and development space rose one cent to 77 cents per square foot, while the lease rate for manufacturing and warehouse space fell three cents to 54 cents per square foot.
Construction
Construction on six buildings was completed in the quarter, adding 317,271 square feet of industrial space in the manufacturing and warehouse sector. While construction has slowed from the torrid pace of the late-1990s, there still are 32 industrial buildings of about 1.1 million square feet under construction through the first quarter, a sign of the recent demand for quality industrial buildings.
Data and analysis provided by CB Richard Ellis Services Inc.’s Global Research and Consulting.
