The South County market is made up of about 1,700 office, retail and industrial buildings totaling 72.3 million square feet.
This ever-changing market contains relatively new buildings, but is still able to accommodate development.
With the exception of the office sector, vacancy levels remain in the single digits for industrial and retail buildings. The lowest vacancy level is for manufacturing and warehouse space, which stands at 2.2%.
Research and development industrial properties have a slightly higher vacancy rate at 3.9%, while retail space holds a rate of 4.1%.
Office vacancy rates have seen the largest yearly increase, climbing to 15.4% from 9.8% in the third quarter of last year.
Rental rates are declining slowly. The average asking lease rate for office space in South County has dropped 12 cents during the past year to $2.61 per square foot.
Retail buildings also saw an average decrease in rent to $2.58 per square foot, down 27 cents from last year.
The industrial sector has seen a less dramatic decline in rent as the manufacturing and warehouse market has only shed 1 cent
to 87 cents per square foot, while the research and development market gained 3 cents during the past year to $1.21 per square foot.
Because South County contains available vacant land, in comparison to the other regions of Orange County, new construction is an option.
However, the current economic situation has curtailed development plans. Currently, there is slightly more than 54,000 square feet of commercial properties in the construction phase.
This is down significantly from the construction activity a year ago. The majority of the office space delivered to the market during the past 12 months is unoccupied and is a contributor to the rise in vacancy rates.
There have been no new retail developments to break ground recently and, in some cases, construction has been halted until economic conditions improve.
Industrial construction in South County remains conservative, with only one building totaling 14,000 square feet under construction.
Analysis by CB Richard Ellis Group Inc.
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