The Office Market
The office markets of North and Central Orange County total about 27% of the total net rentable office square footage in Orange County. Both markets prospered in the fourth quarter, with a sharp increase in net absorption of 253,980 square feet, bringing the year-to-date total to 600,843 square feet. The high quarterly absorption pushed vacancy rates down to 10.1% in the fourth quarter from 11.1% in the third quarter. Average asking lease rates inched up 1 cent to end the year at $1.71 per square foot per month. Construction activity slowly climbed to 368,757 square feet in the fourth quarter, with a new building breaking ground at the Brea Corporate Park that is expected to wrap up around November. Another low-rise building was completed at the same project in the fourth quarter, adding 33,347 square feet to the North/Central Orange County base.
The Industrial Market
The industrial projects in North Orange County make up nearly half of the manufacturing and warehouse base and 23% of the research and development base in Orange County. In the fourth quarter, net absorption in the M & W; sector increased to 718,144 square feet, pushing vacancy rates to a record low of merely 0.4%. R & D; progressed upward during the fourth quarter to a positive 75,938 square feet from a negative absorption of 82,978 square feet in the third quarter. The vacancy rate for R & D; space in North Orange County dropped during the fourth quarter to 3.7%. In response to the lack of vacant M & W; product in North Orange County, 18 new buildings totaling 562,294 square fee, are under development in the market.
The Retail Market
With more than 36 million square feet of space, the North and Central Orange County markets account for half of the gross leasable area of the OC retail market. Retail construction activity remained constant from the third quarter with two power centers, one in North and one in Central OC under development. Positive absorption of approximately 70,000 square feet occurred in the fourth quarter, bringing the total annual absorption to 84,823 square feet. Vacancy rates dipped to 7.8% from 8.4% in the third quarter. The average asking lease rate for retail shop space ticked up 1 cent in the fourth quarter, to $1.53 per square foot per month.
