Orange County’s retail market remained fairly strong through the third quarter.
Just 3.2% of the 26.9 million square feet of shop space in OC was vacant in the quarter. That’s down from vacancy of 3.7% in the second quarter and 4.7% a year ago.
The low vacancy was partly due to the redevelopment of existing retail centers into higher density, mixed-use developments. South and Central counties continue to see dramatic vacancy drops, with West County holding the tightest rate of 2.7%.
Of the center types, neighborhood and strip centers carried the lowest vacancy rates of 2.8% each, while specialty centers had the highest vacancy level at 5.5% in the third quarter.
Demand for OC’s retail space led to 133,691 square feet of positive absorption in the quarter, bringing the year-to-date total to 374,926 square feet.
Central Coast was the only submarket to post negative absorption in the quarter,a nominal 1,140 square feet. Central County, which includes Orange and Santa Ana, ended the quarter with more than 85,000 square feet of positive absorption.
Community and neighborhood centers recorded the most absorption among center types, with 53,290 and 51,021 square feet, respectively.
Average rental rates ended the third quarter at $2.35 per square foot, down from $2.40 per square foot in the second quarter but up 13% from a year earlier.
Asking rents ranged from a low of $1 per square foot in North County to a high of $4 per square foot in most South County malls.
Specialty centers have generated considerable foot traffic in the past few quarters. These destination retail centers boosted asking rates to $2.92 per square foot.
Construction of new retail space continued at a steady pace in the third quarter. There were no completions of retail centers in the period, but more than 2 million square feet of space is under development.
More than half of the county’s construction is in South County. Projects there include the 279,000-square-foot redevelopment of Orchard Saddleback and the 165,000-square-foot Arbor.
Faced with fewer large parcels of land to develop, cities and investors have begun making over existing centers in densely populated areas to attract upscale tenants and provide more tax revenue.
Data and analysis provided by CB Richard Ellis Group Inc.’s Information Management Group.
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