Real Estate Watch: West Orange County
Signs of Recovery Bode Well for Absorption, Rates
By BOB GOODMANSON and SCOTT SMITH
West Orange County saw a challenging year in 2001.
The economy had been slowing since summer with leasing and sale activity dropping even more dramatically after Sept. 11. After a lull of several months, a new sense of optimism is beginning to surface. Corporate users with lean inventories now are looking at expanding their warehousing requirements.
The increase in defense spending is estimated to go from a 16.25% increase in 2001 to 23% in 2002, and manufacturers will have to respond with increased production.
At the same time, vacancy in West County is a relatively low 4.4%, and job growth is expected to increase about 1.2% in Orange County overall. Availability, at 6.5% at the start of last year, climbed to 6.9% during 2001 and has fallen back to 6.5%.
In the past two quarters, the net absorption and lease rates both declined due to corporations offering their excess warehouse space for sublease at submarket prices. The renewed demand for warehouse expansion will mean the absorption of this excess warehouse space, in short order, followed by a decline in availability that already is being felt.
Examples of leasing activity in the past 60 days include: Linder’s Furniture leasing 100,800 square feet and Allied Wheel Components leasing 83,140 square feet, both in Garden Grove. Boeing Co. leased a 62,700-square-foot facility located in Huntington Beach. Gross leasing and sales activity last year was about 2.1 square feet, compared with a peak of 3.6 million square feet in 2000.
The most recent project to be completed is the four-building complex of industrial and corporate headquarters buildings offered for sale or lease by Ewing Development on Walker Street in Cypress. The building sizes range from 39,000 square feet to 67,000 square feet.
Boeing Realty also recently started marketing of phase II for finished land sites from 2.3 acres to 38 acres in Huntington Beach. The strategically located sites are for sale or build-to-suit development.
Preliminary figures for the first quarter suggest that a recovery is under way. The supply of buildings in West Orange County is limited and any upturn probably will lead to higher real estate prices and absorption later this year.
Goodmanson is senior vice president and Smith is first vice president in the Anaheim office of CB Richard Ellis. Data provided by CB Richard Ellis Global Research and Consulting.
