Real Estate Watch: Orange County Construction
Construction: Office Winds Down, Retail Steady
Office Construction
More than 15 million square feet of office space have been added to Orange County since 1997.
The construction cycle peaked during the past two years with an average completion rate of about 4.6 million square feet. But as new office space began to outpace demand, construction began tapering off near the end of 2001. It continued to slow in the first quarter.
Construction on seven buildings was completed in the first quarter 2002, adding 653,077 square feet of space to the office market. Only one new building was added to the current development activity in the first quarter. The Vantis office development, a 178,000-square-foot, mid-rise complex in Aliso Viejo, broke ground in February and is 67% preleased. While about 11.7 million square feet of space remains in the planning pipeline,mostly additions to existing projects,most have been placed on hold until demand catches up to supply.
Industrial Construction
OC’s industrial market saw a similar construction cycle to office market with the peak averaging around 4.5 million square feet in 1998 and 1999. Work on six buildings was completed in the first quarter, adding 317,271 square feet to the manufacturing and warehouse sector.
Industrial construction has slowed from the quicker pace of the late 1990s. In all, 32 industrial buildings totaling about 1.1 million square feet remained under construction in the first quarter. Those projects are designed to fill unmet demand for new industrial space.
About 58% of construction under way is for manufacturing and warehouse space, the majority in North Orange County. The remaining 42% of the construction is research and development space split among Anaheim, San Clemente and the Irvine Spectrum.
Retail Construction
OC retail construction has continued with the activity level unchanged during the second half of 2001. As 2002 began, two retail centers broke ground, adding 1.3 million square feet to the development under way. Both projects are in the central coast market.
The largest construction in the retail market continues to be concentrated in South Orange County, where four centers totaling 1.4 million square feet of gross leasable space are in the works, following the residential construction growth in the market. No new construction was completed in the first quarter.
Data & Analysis provided by CB Richard Ellis’ Global Research & Consulting.
