The Office Market
Together, the North and Central areas of Orange County account for nearly 32% of the county’s office base. With the exclusion of the first quarter of 1999, the vacancy rate for North and Central Orange County has remained greater than 12% for the past five quarters. Within the last quarter, the North and Central Orange County shot up to13.86%, an increase of almost 8% over the third quarter rate of 12.48%. The increase in vacancies in the quarter was largely due to the departure of a large tenant in North Orange County. This migration, in addition to other activity in the market, brought about a negative net absorption of 247,907 square feet for the two areas combined. The average asking lease rate for office space in North/Central Orange County has gone up 13 cents (8%) over the past year, to $1.67 per square foot per month in the fourth quarter.
The Industrial Market
The North/Central area accounts for 43% of the county’s industrial base, and is a tight market with high demand. The largest share of space in the North/Central area is manufacturing and warehouse (M & W;) space. M & W; space is 90% of the market in this area, and continues to grow. As of the end of the year, eight M & W; buildings totaling approximately 675,000 square feet were under construction, while no research and development construction was under way as of year-end. The North/Central area has the lowest industrial availability of all areas in Orange County, with a rate of just 5.57%. Actual vacancy for this area stands at a mere 2.38% as of the fourth quarter. Although the average asking lease rate for M & W; space did not change from 53 cents per square foot per month in the third quarter, that was 8% greater than the 49 cents posted in the fourth quarter of 1998. R & D; average rates rose 5 cents (6%) in the fourth quarter to 78 cents per square foot per month. This rate is a dramatic increase of 28% over the rate at the end of 1998, when the average was 65 cents.
The Retail Market
The retail market in the North/Central part of Orange County is just more than half of the county’s retail base. The vacancy rate for retail space in the North/Central area rose for the first three quarters of 1999, but dropped down to 7.78% in the fourth quarter. This drop is a year-to-year decrease of 17% from the fourth quarter of 1998, when the vacancy rate was at 9.41% in this area. By the end of the year, approximately 655,435 square feet of retail space was under construction. The average asking lease rate for shop space dropped in the fourth quarter to $1.36, down from $1.41 in both the second and third quarters of 1999. Year-to-date, approximately 232,146 square feet of net absorption have been experienced, the majority of positive absorption for the year was seen in the fourth quarter when the absorption was a positive 153,022 square feet.
