Airport Vacancy Rates Improve
By SIMON DILLON
The John Wayne Airport area lease vacancy rates improved versus a year ago for all building types: office, manufacturing and warehouse, retail and research and development.
Meanwhile, real estate is selling at huge premiums, with more active investors than active tenants in the market.
Economic dynamics are fueling the buying frenzy with low interest rates, capital markets’ strong interest in real estate and a big number of 1031 exchange buyers competing to find properties among the reasons for the active market.
The airport area provides a solid long-term investment strategy for real estate investors. The area has matured into one of the most exclusive and prominent locations in California.
Many of the development opportunities have been exploited during the last hot leasing cycle, with a finite number of development opportunities remaining. The end likely will take place during the next hot leasing cycle.
This is very good for owners as the lack of supply means prices will rise.
Office lease activity is on the rise in the airport area, with aggressive real estate investment trusts leading the charge.
CarrAmerica Realty Corp., a Washington, D.C.-based real estate investment trust, has made four lease deals in the past 30 days and is closing in on a fifth at its Alton Deere project.
Meanwhile, Chicago-based Equity Office Properties Trust also is enjoying similar success at its Inwood Park project.
But the high current activity level can be deceiving.
About 70% of active tenants in the market likely will renew leases in their current space. This makes it very difficult to gauge real activity levels.
The conclusion: The window of opportunity for tenants already has been open for a few quarters longer than most forecasters expected.
Dillon is a vice president in CB Richard Ellis’ Newport Beach office.
CHART NOTES:
Office Market: Single-and multi-tenant buildings and parks of 30,000 square feet or larger but excluding government and medical buildings, in the cities of Corona del Mar, Costa Mesa, Fountain Valley, Newport Beach and parts of Irvine, Santa Ana and Tustin and encompasses the following submarkets: Airport Office Area, Irvine Business Complex, Newport Center and South Coast Metro. Rental rates are full-service gross. Industrial Market: Buildings 10,000 square feet or larger in the cities of Costa Mesa, Fountain Valley, Newport Beach, Santa Ana, Tustin and Irvine other than Irvine Spectrum. Gross available includes space under construction. Rental rates are triple net. Retail Market: Retail centers 50,000 square feet or larger, for the cities of Costa Mesa, Irvine and Newport Beach. Vacancy and rents exclude regional malls and freestanding buildings and are shown for shop space only, excluding anchor tenants. Gross available excludes space under construction. Retail rents are triple net. All Property Types: Historical figures have been adjusted to reflect changes to the base, consequently historical figures reported herein may not agree to previously reported figures.
