INDUSTRIAL MARKET:
Absorption Improves, Vacancy Rate Rises, Lease Rates Tick Up
The unique challenges faced by California businesses continued to hurt growth of Orange County’s industrial market through the first quarter.
Despite posting strong activity levels, the county posted negative absorption for the sixth consecutive quarter.
Although vacancy rates have continued to grow as manufacturers downsize, available space in the industrial market remains fairly tight in Orange County. Vacancy was at 5.6% in the quarter.
The bright spot in the county: the research and development market, where positive growth was seen for the first time since mid-2002.
Absorption levels were positive for R & D; buildings in nearly every market during the first quarter, with most absorption in the John Wayne Airport area.
Net Absorption
Although absorption levels for industrial buildings in Orange County remained negative this quarter, net absorption improved from negative 772,633 square feet to negative 442,013 square feet. The results indicate that fewer tenants are leaving the market.
The demand for research and development space increased in the first quarter, with more than 265,000 square feet of positive absorption in OC.
South County posted the best overall absorption results with 29,001 square feet of negative absorption.
Vacancy Rates
The amount of vacant square feet of industrial space continues to rise in the county as manufacturers continue to downsize.
Despite the overall loss, the research and development market saw strong absorption this quarter and vacancy dropped to 7.8%.
The largest decline in vacant square feet in the first quarter was in the John Wayne Airport area, where a 13.3% drop in vacancy was seen.
Lease Rates
Average asking lease rates for OC industrial space increased by one penny per square foot in the first quarter.
OC’s asking rent now stands at 59 cents per square foot for industrial buildings.
Manufacturing and warehouse buildings saw a one-cent-per-square-foot increase in asking rates in the first quarter while research and development buildings saw no change.
South County and the airport area are the most expensive markets in the county at 72 cents and 64 cents per square foot, respectively.
Construction
The amount of industrial space being built in the county increased in the first quarter to 1.1 million square feet.
Manufacturing and warehouse buildings make up 74% of the buildings being built.
OC saw just two buildings totaling 90,227 square feet complete construction this quarter.
With more than 1 million square feet in the planning stages, an economic boom could start a flurry of industrial construction in the county.
Analysis provided by CB Richard Ellis Inc.’s Information Management Department.
