There are some indications that Orange County’s research and development sector is improving.
The sector, which has struggled in the past few years amid the economic downturn, saw 383,776 square feet of activity in the fourth quarter. Although that’s down 21% from the previous year, both the vacancy rate and the availability rate were down.
The vacancy rate for R & D; space was 4.6% at the end of the fourth quarter, down from 7.6% a year ago. The availability rate was 8.6%, down from 12.4%.
The John Wayne Airport area saw the most gross activity in the quarter, with 193,728 square feet leased and sold. The area accounts for 413 of the region’s 1,057 projects.
The heavy saturation in West County and North County has led to the emergence of the airport area, a relatively newer region, as a prospect for R & D; buyers and tenants. South County also is an emerging area for R & D; tenants looking to expand.
Net absorption was negative 11,244 square feet in the fourth quarter. A year earlier, net absorption stood at negative 397,256 square feet.
While the sector posted a statistical improvement, it hardly suggests that R & D; is active. Trends in the R & D; sector are unpredictable at best, accented by a few random spikes.
The R & D; lease rate was 74 cents per square foot at the end of the fourth quarter, down from 85 cents in the third quarter.
The R & D; sector, which accounts for about 17% of OC’s overall industrial space, faces challenges that the manufacturing and warehouse sector doesn’t. It’s a smaller sector than manufacturing and warehouse, and more expensive.
Meanwhile, many R & D-type; jobs are being outsourced. These factors make new investors in the sector scarce.
There is some optimism for R & D.; There are six buildings in the planning stages that are set to add 88,580 square feet of space when finished.
The sector’s future depends on several factors, including availability, employment rates, interest rates and how well it can integrate technology into its practices.
Data and analysis provided by CB Richard Ellis Group Inc.’s Global Research and Consulting unit.
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