The Orange County industrial market has grown to nearly 240 million square feet after another quarter of industrial construction that added almost 2 million square feet to the base. The majority of this new construction was manufacturing-and-warehouse-type space, which now accounts for 83% of the total industrial base.
Availability Rates
The strong sales and leasing activity of the second quarter brought the availability for industrial space in Orange County down to 5.99%. Availability in the M & W; sector fell to 5.21%, down from 5.66% the first quarter. Research and development availability finally dropped below the 10% threshold in the second quarter, to 9.83%. Actual vacancy for R & D; space dipped below 5% in the quarter, to 4.78%, while M & W; vacancy reached a low of just 1.61%.
Absorption
During the second quarter, nearly 4.5 million square feet were leased or sold in the industrial market, approximately the same amount of gross activity seen in the first quarter of the year. Net absorption remained positive, although the amount declined from the previous quarter due to new construction added to the market. The second quarter ended with 642,656 square feet of net absorption.
Average Asking Lease Rates
The average asking weighted lease rate for all industrial-type space dropped slightly in the second quarter by 1 cent for M & W; space and by 2 cents for R & D; space. As newer projects with higher asking rents are being absorbed, the older spaces with lower rents are increasing in availability, causing the appearance of declining rates, when in actuality, the average asking prices in the market are on the rise. The current average rents stand at 55 cents per square foot for M & W; space and 79 cents per square foot for R & D; space. Average sale prices for industrial buildings continue to move upward. The average asking sale price for M & W; space rose this quarter to $73.39 per square foot, and the asking price for R & D; space is up to $112.34 per square foot.
Construction
Despite the low supply of buildable entitled land in Orange County, industrial construction activity increased in the second quarter of 2000. By the end of the second quarter, nearly 2 million square feet were in the development stages, an increase of 22% over construction during the first quarter. Approximately 88% of this new construction is M & W-type; product, most of which is concentrated in the southern portion of the county. The remaining 12%, which is R & D; type space, is taking place in West and South Orange County.
