The retail market proved to be strong at the beginning of the new century. First-quarter vacancy rates were down, net absorption was positive, lease rates were up, and construction activity increased.
Vacancy Rates
In the first quarter, vacancy rates in Orange County continued the decline that began in the second quarter of 1999. The first-quarter vacancy rate dropped to 7.76%, a 2% decrease from the fourth quarter. The current vacancy rate is 7% lower than the 8.38% vacancy rate in the first quarter of 1999. Vacancy rates for all five submarkets within the Orange County retail base remain in single digits.
Net Absorption
For the quarter, the retail market produced positive net absorption of 264,724 square feet. The majority of the positive absorption was recorded in the Central Coast market, while the only market to experience negative absorption was South Orange County. Strip centers had the greatest positive net activity for the quarter with more than 200,000 square feet absorbed, followed closely by neighborhood centers and specialty centers, respectively.
Lease Rates
Over the past year, average asking lease rates for retail shop space have been hovering at or just above $1.50 each quarter. In the first quarter of this year, the overall average asking lease rate went up 5 cents, to $1.55 per square foot. Average asking lease rates for shop space ranged from a high of $2.13 per square foot in Central Coast to a low of $1.18 per square foot in North County.
Construction
Retail construction activity increased to 2.4 million square feet in the beginning of 2000, up from 2 million square feet at the end of 1999. Only one center was completed in the first quarter, an 80,435 square-foot neighborhood center in North Orange County. In addition to the centers that remain under construction, three new centers broke ground to start off the century: one 135,000-square-foot strip center in Huntington Beach, a 150,000-square-foot neighborhood center in Irvine, and a 175,000-square-foot specialty center in Anaheim. Combined, these new centers will add 460,000 square feet to the Orange County retail base upon completion.
