Economic uncertainty remains an ongoing reality for the nation. Businesses and consumers both have had to make hard decisions leading to cutbacks in production and discretionary spending. Consumer confidence, which had decreased moderately in January, declined again in February, reaching yet another all-time low of 25, according to the Conference Board Consumer Confidence Index.
The reduction of consumer spending since this downturn began continues to be evident in local retail property markets.
Decreased sales for the majority of retail tenants decrease the demand for new retail space.
The Orange County retail market saw an overall first-quarter vacancy rate of 7.2%, up 16% from the fourth quarter.
There was 295,443 square feet of negative absorption recorded in the first quarter, the majority of which occurred in community and neighborhood centers.
The average asking lease rates for the county declined an additional 2 cents from the fourth quarter to $2.61 per square foot.
Due to the lack of tenant demand, construction of new retail space has significantly declined and, in some cases, halted.
Developers have opted to put plans that were scheduled for this year on hold until the market regains some balance.
In the first quarter, no new centers were added in OC. Currently 291,000 square feet of new retail space remains in the construction phase in the West Orange County submarket. Pacific City in Huntington Beach is scheduled to complete 191,000 square feet by the end of the year, and the 100,000-square-foot Westminster Asia Plaza also is due to complete construction by the end of 2009.
Across the board, local submarkets saw rises in vacancy in the first quarter.
South County saw the most significant rise in vacancy to 7.5% from 6% the previous quarter. Central County’s vacancy increased to 7.5%, a 16% rise, and West County also saw a 16% rise from the fourth quarter to 6.6%.
Of the center types, specialty centers continue to have the highest vacancy levels, although decreasing to 10.7% from 11.2% recorded in the fourth quarter, while strip centers now hold the lowest vacancy at 4.4%.
Continued retailer closings coupled with decreased demand for new space resulted in 295,443 square feet of negative absorption. The majority of the negative absorption was recorded in the Central and South County submarkets, which posted more than 224,000 square feet of negative absorbed space.
Analysis provided by CB Richard Ellis.
