Orange County’s research and development sector accounts for roughly 17% of the region’s total industrial base. The sector saw a slow first half of 2009, with increased vacancy and lower rents.
In the second quarter, the sector—which totals more than 1,000 buildings and 42 million square feet of space—saw147,608 square feet of absorption, a 66% decline from a year earlier.
Both the second quarter overall vacancy and availability rates saw increases for the third consecutive quarter. As it stands, there are more than 2.2 million square feet of vacant research and development space yielding an increased vacancy rate of 5.2%. The change in vacancy represents a 21% increase from the first quarter and a 73% increase from a year earlier.
The sector’s availability rate hit 9.6% in the second quarter, rising slightly from 9.2% in the first quarter and rising 23% from second quarter of last year.
Year-to-date, there has been more than 729,000 square feet of negative absorption. The majority of the negative absorption was concentrated in the South County submarket, which was responsible for more than half of the vacated space. The average asking lease rate was 94 cents per square foot in the second quarter. While dipping one cent from the first quarter, this new asking rate represents a 14-cent decrease from last year.
The growth of research and development space has come to a halt, much like in the manufacturing and warehouse market. Currently, the industrial market has one building under construction, which is a 52,840-square-foot built-to-suit warehouse in Fountain Valley.
Many business decisions to expand or relocate have been put on hold until an economic balance can be achieved, which has resulted in decreased demand for new space. Because of this, developers also are putting their plans to build on hold.
Data and analysis provided by CB Richard Ellis Group Inc.
