Research and development space is nearly 17% of the Orange County industrial market. Although the size of the market is small compared to the manufacturing and warehouse market, the R & D; sector remains a significant portion of the industrial base, as it is a viable alternative to office tenants seeking lower cost space.
The average asking lease rate for R & D; space gradually dropped throughout the year, ending 2000 at 74 cents per square foot per month, down from 88 cents at the end of 1999. The decline was not a sign of a struggling market. Rather, it was an indication that the newer, more expensive R & D; space was absorbed quickly, and older spaces on the market, with lower lease rates, became available. South Orange County continued to dominate the rent scale with an average asking lease rate of 85 cents in the fourth quarter, and the Airport Area followed closely behind, just 2 cents lower.
Driven by more than 1 million square feet of lease and sale activity, availability of R & D; space fell to 7.0% in the fourth quarter, down from 9.1% in the third quarter. Along with availability, actual vacancy of R & D; space ended 2000 at a low of just 2.8%. The majority (84%) of the sale activity in the fourth quarter took place in North Orange County, while 40% of the leasing activity took place in the Airport Area. Net absorption increased in the fourth quarter to 621,602 square feet, pushing the annual total to more than 2 million square feet.
As of the fourth quarter, 165,355 square feet of R & D; development was under way in Orange County. One property totaling 32,075 square feet was under construction in San Clemente. However, the majority of the construction was in West Orange County, including one building in Garden Grove and the Woodwind Commerce Park, a three-building project in Huntington Beach.
