Real Estate Watch: North/Central County
North County Sales Prices Hit High
By IAN BRITTON
Low interest rates continue to help North County business owners lock in low occupancy costs, even as tenants suffer through a sluggish economy.
The lack of available land in North County, coupled with relatively strong demand, has encouraged tenants and investors to target industrial real estate as a stable investment compared to the risks of a volatile stock market. Prices are at record highs.
As a whole, Orange County’s unemployment picture continues to outperform the rest of California, despite losing about 5,600 manufacturing jobs in the fourth quarter.
The lack of job growth and the conflict with Iraq has had a negative impact on the North County leasing market, resulting in negative net absorption of nearly 700,000 square feet in the fourth quarter.
Several North County business owners continue to downsize as sublease space (particularly in Brea and Fullerton) accounted for more than 15% of total available square footage for the quarter.
Asking lease rates remained stable at about 51 cents triple net per square foot per month in the quarter, even as more space came on the market than was leased.
Smaller properties in the 10,000- to 30,000-square-foot range accounted for most of the quarter’s activity, just as they have for the previous six quarters. Space in this sector is leasing at the mid 50 cents per square foot per month level.
Buildings larger than 70,000 square feet continue to move very slowly. Six new properties in this range came available in the quarter.
In fact, the only deal of this size in the fourth quarter was in Placentia,a 72,736-square-foot building at 567 Melrose.
On average, larger properties (70,000 square feet and greater) are being marketed in the low 40 cents per square foot per month. Most landlords are willing to negotiate very aggressively to attract the limited number of prospects in the market.
Concessions such as free rent and tenant improvement allowances of $1 to $2 per square foot are being offered to help tenants minimize upfront costs.
Despite the slowdown, North County is poised for a sharp turnaround when the market corrects.
The area has a qualified labor pool, a balanced integration of office and industrial space and a high quality of life, which is why insurance companies, pension fund advisers and developers continue to target the area.
Britton is a sales professional in the Anaheim office of CB Richard Ellis.
