Although industrial activity has cooled considerably from the robustness seen in previous years, the Orange County Research and Development Market has tightened continually since the second quarter of 2000. Net absorption in the R & D; market reached a five-quarter high of 293,000 square feet in the second quarter of this year, keeping total industrial net absorption in the black. As a result, the R & D; vacancy dropped once again, to 2.8%, down from 3.9% in the second quarter of 2000. Although the amount of actual vacant space tightened, the amount of available space (being marketed for future sale or lease) increased in the second quarter, presenting increased opportunities for larger tenants to find quality space within the market. The availability rate for R & D; space rose to 8.1%, up from 6.8% in the first quarter.
The pace of activity has slowed in the industrial market due to insecurity about the economic market. Although quarterly gross activity for R & D; space was only half the level recorded in the second quarter of last year, total sale and lease activity in this year’s second quarter increased from the first. Nearly 500,000 square feet were leased or sold in the second quarter, a 4% sequential increase in gross activity.
Asking rents in the R & D; market stabilized at 80 cents per square foot per month in the second quarter. South Orange County continued to boast the highest average asking lease rates, at 92 cents per square foot, 15% more than the county average. While the average asking lease rate leveled in the second quarter, the average asking sale price for R & D; space in Orange County rose 9% to approximately $122.12 per square foot.
R & D; construction activity nearly doubled in the second quarter, to 231,637 square feet. Nine new R & D; buildings broke ground in the second quarter adding more than 135,000 square feet to the development activity already under way. The Burke Corporate Center in San Clemente accounted for nearly 60% of the new construction started in the second quarter, in addition to the Dyer Business Center in Santa Ana and another 33,000-square-foot building in Irvine.
Analysis provided by CB Richard Ellis’ Global Research and Consulting.
