Industrial Market
The story of the Orange County industrial market through September is one of recovery.
In addition to vibrant small-tenant activity, a number of large tenant deals were finished in the third quarter, which turned net absorption positive and pushed availability and vacancy rates downward.
Vacancy Rates
The overall industrial vacancy rate in OC fell to 3.9% in the third quarter, the same rate seen at the end of last year.
Meanwhile, the availability rate for industrial space fell to 7.9%, down from 8.6% in the prior quarter.
Third-quarter activity was strongest in the manufacturing and warehouse sector, with the vacancy rate falling to 3.3% and the availability rate down to 7.3%.
Although the vacancy rate for research and development space rose in the third quarter, the increase tapered considerably from the rapid rise seen in the past year and a half. It was 7.1% at the end of the quarter, up slightly from 6.9% in the previous quarter.
Net Absorption
Activity in the industrial market nearly doubled during the third quarter to 4.6 million square feet.
Net absorption had a sharp increase to 1.1 million square feet, following six consecutive quarters of negative absorption.
Half of all activity in the quarter took place in the North County market where there were three leases and two sales to tenants for space greater than 100,000 square feet. That pushed net absorption in North County to 951,849 square feet.
The John Wayne Airport area accounted for another 24% of the quarter’s activity. Two leases and one tenant sale on space greater than 100,000 square feet closed in the quarter.
Lease Rates
Asking lease rates have been relatively steady in the past year despite the sharp fluctuations in activity.
The overall average asking lease rate for industrial space held at 58 cents in the third quarter, unchanged from the second quarter and five cents lower than the third quarter last year.
Construction
Industrial construction slowed considerably from the consistent pace in the past several years.
Still, the amount of manufacturing and warehouse space being built increased to 781,198 square feet with the groundbreaking of the remaining 10 buildings of the Voit Brea Business Park accounting for a total of 386,412 square feet.
Three manufacturing buildings were completed in the quarter: two in Anaheim and one in Fountain Valley, for a total of 91,735 square feet.
Analysis provided by CB Richard Ellis’ Global Research and Consulting.
