Orange County’s research and development market is on the road to recovery.
During the past several years, this sector has followed the ups and downs of the dot-com era, with the latest trend being up.
R & D; vacancy rates have improved dramatically, pushing average asking lease rates back up to a competitive range. But developers,aware of the sector’s history,continue to be cautious and construction of new space remains on the conservative side.
The R & D; sector posted 361,101 square feet of gross lease and sale activity in the first quarter. Activity mainly was concentrated in the John Wayne Airport area and South County, where there is a large R & D; base.
The airport area, which accounts for 36% of OC’s R & D; market, had 195,705 square feet of gross activity in the period. There was 130,075 square feet of positive net absorption in the quarter, which pushed the R & D; vacancy rate down 21% to 3%.
South County saw 165,393 square feet of gross activity in the period. Still, the submarket saw negative 122,419 square feet of net absorption due to construction on new R & D; space wrapping up in the Irvine Spectrum.
The new space coming online boosted South County’s vacancy rate to 8.2%.
Vacancy in North County rose from 1.9% to 2% in the first quarter on negative 11,000 square feet of net absorption in the period. Lack of R & D; activity in West County left the vacancy rate flat at 4.7%.
With an overall gain of 4 cents per square foot, the average asking lease rate was 81 cents per square foot at the end of the first quarter.
Despite a drop of 1 cent in the first quarter, the West County submarket posted a 12% increase in lease rates to 76 cents per square foot.
South County, which has the highest R & D; lease rate in OC, held steady at 85 cents per square foot, versus a year earlier. Lease rates in the submarket were up 2 cents compared to the fourth quarter.
Data and analysis provided by CB Richard Ellis Group Inc.’s global research and consulting unit.
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