In response to heavy demand in recent years, office construction activity has been rampant, adding more than 9.6 million square feet to the Orange County base from 1999 to date. However, activity has begun tapering as the market moves further into the maturation phase of the real estate cycle.
Construction activity dropped to 2.4 million square feet in the second quarter, down from 3.7 million square feet last quarter, and several of the projects left in the planning pipeline have been put on hold. Approximately 155,000 square feet were completed in the second quarter, and only one new project began construction: Opus West Corp. broke ground on Phase 2 at the Opus Center Irvine project within the Irvine Concourse development.
The 14-story, 307,000 square-foot, Class A, high-rise building is 42% pre-leased and is scheduled for completion in August 2002.
With industrial vacancy remaining below 5%, construction activity in the market increased to 1.9 million square feet, up from 1.7 million square feet in the first quarter. The large majority (88%) of the industrial construction was of manufacturing and warehouse product. North Orange County, where the M & W; vacancy rate remained less than 1%, had the most construction under way as the second quarter came to a close: 15 properties totaling more than 700,000 square feet. Of the industrial completions during the second quarter, one 15,000 square-foot M & W; building was in Fullerton, in the North OC submarket. The remainder of new industrial product added to the market in the second quarter was in South OC, including three M & W; properties totaling more than 50,000 square feet, and one 10,000-square-foot research and development building in Rancho Santa Margarita. Another 2.7 million square feet remain in the planning pipeline, in response to the continued low vacancy rate in the Orange County industrial market.
Retail construction activity increased in the second quarter to nearly 2 million square feet, up from 1.1 million square feet in the first quarter. Two new projects, one community and one specialty center, broke ground in North OC, adding 680,000 square feet to the total under way. Another community center, Old Ranch Town Center in Seal Beach, broke ground in the second quarter, and will add 300,000 square feet to the West OC base upon completion. One neighborhood center in Ladera Ranch completed construction in the second quarter, meeting the demand for retail space in South Orange County, fueled by continued residential growth.
Analysis provided by CB Richard Ellis’ Global Research and Consulting.
