Demand for space in the Orange County retail market slowed in the third quarter, which resulted in negative absorption of 97,258 square feet. But year-to-date absorption totals more than 575,000 square feet, which is well above the negative absorption experienced the same time last year.
Still below average, the vacancy level in the third quarter stood at 3.5%, rising 9% from second quarter’s rate of 3.2%. OC’s average asking lease rates declined two
cents to $2.54 per square foot, remaining competitive in comparison to its Southern California neighboring counties.
The Bel Mare community center broke ground and stands to add 56,000 square feet to Newport Beach. This newest development brings the OC construction pipeline to 1.6 million square feet. The current space under construction includes such projects as Orchard Hills Village Center, The Strand in Huntington Beach and The Promenade
at San Clemente.
Vacancy Rates
After hovering around 3%, retail vacancy rates increased in the third quarter to 3.5%. Across the board, all OC submarkets experienced a rise in vacancy. The most significant increase of 28% occurred in the Central Coast submarket which posted a rate of 3.7%. This increase is most likely due to the 37,000 of vacated furniture store space at the Irvine Home Center.
Following a strong first half of the year, tenant demand saw a slowdown in the third quarter. There was 97,258 square feet of negative absorption, reducing the year-to-date total to a positive 576,952 square feet.
Average Asking Lease Rates
In the third quarter, the average asking lease rate declined two cents from the second quarter to stand at $2.54 per square foot, which is five cents higher than last year. North Orange County exhibits the widest range of lease rates, from a low $1.25 per square foot at strip centers to a high $6 per square foot in power centers, pushing the overall average to $2.94 per square foot. Also near the $3 mark, the average rate for centers in South Orange County remains at $2.85 per square foot.
Construction Activity
Although the second quarter witnessed the completion of four centers, no new centers were completed in the third quarter. Centers remaining in the construction phase include Anaheim GardenWalk, Orchard Hills Village Center, Bel Mare community center in Newport Beach and the Plaza at San Clemente. Centers still slated for construction include the Rancho Marketplace, Fountains at Buena Park and Center Street Promenade, which will add an additional million square feet to the market in the next four years.
Data and analysis provided by CB Richard Ellis Group Inc.
