REAL ESTATE WATCH – Research & Development
R & D; Continues to Struggle
Even as the economy began to show signs of improvement in the second quarter, the research and development segment in Orange County continued to struggle.
For the most part, technology companies that downsized,or dissolved,in the downturn didn’t take more space in the quarter. Leasing activity remained modest.
Smaller tenants throughout the county accounted for the bulk of the R & D; transactions in the second quarter.
Of the 439,014 square feet of space leased or sold in the quarter, 82% were deals for less than 50,000 square feet of space.
Activity among larger tenants is projected to pick up with some sustained growth of the technology-oriented companies.
The busiest markets were North and South County, where asking rates are the lowest. In North County, 120,599 square feet traded hands in the quarter. In South County, the number was 165,799 square feet.
The lackluster activity in the R & D; segment in the past few years caused vacancy rates to rise dramatically.
The countywide vacancy rate now sits at 7.4%, up 12% from where it was one year ago and up 196% from where it was two years ago.
Consequently, the county also saw negative net absorption for the third consecutive quarter.
The most activity took place in the Irvine Spectrum. But Brea, Costa Mesa, San Clemente and Rancho Santa Margarita were the only cities in the county that actually saw positive absorption.
The limited demand for R & D; space kept developers from starting any new construction this quarter. Many buildings remained in the planning phases.
Only one 34,000-square-foot building is under construction in Buena Park. There are nine buildings planned, which would bring 300,000 square feet of new R & D; space to the market.
The one building that wrapped up construction in the county added 34,000 square feet in the city of Orange and brought the base to 41,970,985 square feet.
Data and analysis provided by CB Richard Ellis’ Information Management Department.
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