Retail Market
SPECIAL REPORT: Commercial Real Estate
The Orange County retail market, which held its own during the downturn, showed the effects of a recovering economy in the first quarter.
Vacancy Rates
The retail vacancy rate continued to drop in the first quarter to 7.5%, down nearly 13% from vacancy at the beginning of last year. Power centers led the retail tightening, with a 35% annual decrease in vacancy. South County was the leading area with an annual vacancy drop of 36.1% to just 5.3% at the end of the quarter.
Net Absorption
Net absorption more than doubled to 108,907 square feet in the first quarter. Nearly every center type had positive activity in the March quarter, with the exception of small negative absorption in the specialty sector. Power centers had the strongest performance with more than 50,000 square feet of positive absorption.
All areas of the county posted positive net absorption in the first quarter, except for South County, which had a modest 7,460 square feet of negative activity and remained the tightest in terms of vacancy.
Lease Rates
Average asking retail lease rates have been virtually unchanged in the past six quarters, fluctuating up or down less than 1% from $1.72 a square foot.
But individual areas did have larger quarterly fluctuations of about 2%. Asking rents in the North, Central and West County areas, which are typically below the county average, dropped in the first quarter. South County saw an increase to $2.04 per square foot, and the average asking rent in the Central Coast area, which typically boasts the premium rate in the county, jumped 2.4% to $2.19, the county’s highest.
Construction
Two retail centers broke ground in the first quarter, adding 1.3 million square feet to the Central Coast market. The new retail centers come after construction was unchanged during the second half of 2001. South County continues to boast the largest concentration of retail development, with 1.4 million square feet under construction, in response to the continued residential growth.
Community centers dominate with 49% of the retail construction market; six centers of 1.9 million square feet are being built throughout the county.
Data and analysis provided by CB Richard Ellis Services Inc.’s Global Research and Consulting.
