The research and development sector’s recovery continued in the third quarter with 205,052 square feet of positive net absorption.
Declining vacancy rates in every market have pushed the overall vacancy rate down to 5.4%. Construction of R & D; space remains moderate with 322,983 square feet being built in the John Wayne Airport area and South County.
Average asking lease rates also are starting to reflect the recovery. Rates increased to 79 cents per square foot in the quarter, while the county’s average asking sale price for R & D; space rose to $128 per square footy.
Most lease and sale activity was in North County, which produced 379,539 square feet of gross activity.
North County also leads OC with a lease rate of 85 cents per square foot, up 21% compared to last year’s rate of 67 cents per square foot. North County vacancy had a dramatic 111% decline to 1.7% in the third quarter. That’s the lowest vacancy rate for R & D; space in OC.
The airport area posted the most construction activity in the third quarter with seven buildings,245,204 square feet,in the development phase. All of the construction is set to finish in the first quarter.
South County has 77,779 square feet of space under construction, which was set to finish by the end of 2004.
Development of R & D; space has been slow since the dot-com fallout of 2001. There are no planned projects for the upcoming year.
Space needs slowly are regaining momentum as companies begin to reinvest back into their R & D; units. New development of R & D; space should continue at its modest pace, keeping vacancy rates at a healthy level.
Although this segment of the market is in the recovery stages, it still remains attractive to both users and investors.
Data and analysis provided by CB Richard Ellis Group Inc.’s Global Research and Consulting.
