By JOSH BONWELL
In North and Central Orange County, the vacancy rate dropped to a record of 3.1% in the second quarter.
Gross activity grew to 3.8 million square feet as we saw gross activity for the period grow by 1.3 million square feet from the first quarter.
This spike primarily was due to activity in Fullerton as leasing and sales activity caused an increase of 503,611 square feet from the first quarter. Net absorption stayed somewhat stagnant as there was a small decrease of 26,054 square feet with 525,987 square feet being absorbed compared to 552,032 square feet in the first quarter.
Construction in the second quarter grew to 1.2 million square feet, from 804,134 square feet in the first quarter.
We saw the largest growth in construction in West Orange County where projects in Garden Grove added to the almost 305,000 square feet of new activity.
Sales activity once again grew in the second quarter. As a result of more space being available for sale, 745,559 square feet was sold in the quarter, up from 600,810 square feet in the first quarter.
We are seeing no slowdown in projects coming out of the ground or resale of existing buildings as demand remains high.
Leasing activity in the second quarter grew by 1.1 million square feet as compared with the first quarter. This large increase can be attributed to fallout from the sales market. Many users who have been in the market searching for space to buy have begun to lease as sales inventory has been low and competition among users high.
Institutional investment interest continues to be strong. The second quarter investment sale activity was highlighted by Irvine-based Sares-Regis’ buy of a 281,548-square-foot facility in Anaheim. Investor demand should continue to be strong due to rising lease rates and the limited availability of institutional grade product.
Residential zoning conversions are generating significant interest in the market. Several major projects in the building and planning stages may generate thousands of homes on what now is industrial zoned land, as with Lennar Corp.’s A-Town in the Platinum Triangle. Although the residential infill activity is active, developers are turning cautious, waiting to see results from projects already entitled and under construction before making hard money commitments to additional projects.
Bonwell is a senior associate in the Newport Beach office of CB Richard Ellis.
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