Orange County’s research and development sector had a mixed fourth quarter.
There was 426,294 square feet of gross absorption of R & D; space in the period. While that represents a 31% decrease from the prior quarter, vacancy and availability rates are increasing.
There is more than 2.1 million square feet of empty R & D; space in OC, with the vacancy rate at 5% in the fourth quarter. Vacancy was up from 4.9% in the third quarter and 4.3% a year ago.
As a result of the heavy saturation in West County and North County, the John Wayne Airport area is emerging as a good prospect for buyers and tenants.
South County also is becoming a popular area for R & D; expansion.
There was 140,412 square feet of net absorption in the fourth quarter. That’s down from the 341,427 square feet absorbed in the third quarter.
The average asking lease rate in the fourth quarter was up 1 cent to 81 cents per square foot, versus the third quarter. Lease rates were up 3 cents from a year earlier.
OC’s R & D; sector has more than 1,000 buildings with 42 million square feet of space. It accounts for roughly 17% of the region’s industrial sector.
The R & D; sector faces challenges that don’t necessarily affect the manufacturing and warehouse market.
Not only is the R & D; market expensive, its size is dwarfed by manufacturing and warehouse space.
That makes for little room to grow and lowers investment opportunities.
Meanwhile, many R & D; jobs are being outsourced by technology companies.
There are just four R & D; buildings totaling 72,437 square feet under construction. And an increasing number of developers are converting industrial properties into retail and residential uses.
The future of OC’s R & D; sector depends on several factors, including availability, employment, interest rates and how well it can handle requirements from technology companies.
Data and analysis provided by CB Richard Ellis Group Inc.’s Global Research and Consulting.
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