Orange County has seen a slow but steady manufacturing improvement thanks to a resilient economy.
The county posted nearly 500,000 square feet of positive net absorption in the third quarter. After seeing negative absorption in the first quarter followed by a big rebound in the second quarter, year-to-date net absorption for the county’s industrial market is 1.6 million square feet.
Although growth in total activity for manufacturing/warehouse and research/ development space has slowed slightly, Orange County’s vacancy rate fell to 4.8% in the period.
Net Absorption
The industrial market saw 465,606 square feet of positive net absorption in the third quarter. For the third consecutive quarter, the R & D; market posted 205,052 square feet of positive net absorption.
After recording impressive levels of activity, net absorption for buildings in the manufacturing/warehouse market was 260,554 square feet.
The John Wayne Airport area had the highest overall industrial absorption with more than 378,000 square feet of positive absorption. South County’s manufacturing/warehouse sector saw the largest absorption increase. The airport area posted the best absorption gains for R & D; space.
Vacancy
The amount of vacant industrial space hit its lowest mark since the first quarter of 2003. Manufacturing/warehouse vacancy fell to 4.7% thanks to two consecutive quarters of positive net absorption. R & D; vacancy has fallen 34% versus the end of 2003.
West County had the tightest overall industrial vacancy at 3.4%, dropping from 4.2% last quarter. North County’s R & D; market is just 1.7% vacant.
The total amount of available industrial space also dropped this quarter to 7.4%, marking the lowest rate since the fourth quarter of 2002.
Lease Rates
The average asking lease rate for Orange County industrial space fell one cent in the third quarter to 59 cents per square foot. Average lease rates have remained relatively stable in the past 12 months, neither rising nor falling by more than one penny.
R & D; asking rates increased by a penny while manufacturing/warehouse buildings saw a three-cent drop to 53 cents per square foot. Although South County remained the most expensive overall industrial market at 77 cents per square foot, North County’s R & D; sector reached 85 cents per square foot in the third quarter.
Construction
West County delivered the only new industrial building in the third quarter, bringing total year-to-date completions to 766,509 square feet.
Three R & D; projects broke ground during the third quarter, with a total of 682,062 square feet of industrial space under construction.
Most construction is in the airport area, though no projects are set to complete construction until the first quarter of 2005. The R & D; sector represents 47% of the buildings under construction, up from 30% in the previous quarter.
With more than 320,000 square feet expected to complete construction in the fourth quarter, total new industrial space should better 1 million square feet by the end of the year.
Analysis provided by CB Richard Ellis Group Inc.’s Information Management Department.
