By KEITH BLACK
Research and development space makes up some 40% of the South County industrial market with 364 buildings totaling 12.9 million square feet.
The South County submarket accounts for 32% of all the vacant research and development space in Orange County. West County accounts for roughly 23% and North County claims 9% of the vacant space.
Similar to the office and manufacturing and warehouse markets, which have seen dramatic increases in their vacancy and availability rates in the past year, the research and development market has continued to feel the ripple effect of our volatile economy, facing a slowdown in demand as well as an increase in availability.
To summarize the first quarter statistics, the South County research and development market vacancy rate increased from 4.2% to 4.6%. The availability rate also increased from 8.7% to 10.9%.
The increases can be attributed to the fourth quarter seeing 54,862 square feet of activity combined with 40,750 square feet of negative absorption. The research and development market remains slow with the majority of activity being lease renewals.
Looking at the deals that took place in the first quarter, there were only two completed, down from the three that took place in the fourth quarter. As is the norm, smaller to midsize users (less than 50,000 square feet) represented all of the deals.
These small to midsize users accounted for 100% of the square feet absorbed in the first quarter. Buildings larger than 50,000 square feet currently account for 56% of the total square feet available but only about 21% of the number of buildings available.
As the second quarter comes to a close, we expect some trends to continue. Absorption should remain slow while companies evaluate their future real estate needs. The market in general has already seen an increase in supply from 2008 with the addition of a few quality research and development buildings hitting the market.
These trends have created a unique opportunity for companies to reduce their overhead and operating costs by relocating to a more efficient facility while improving quality and image.
Black is a senior associate in the Newport Beach office of CB Richard Ellis Group Inc.
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