RETAIL MARKET
Vacancy Rate Falls, Lease Rate Declines, Net Absorption Up
Retail continues to be the best-performing real estate sector in the wake of economic concerns and the war with Iraq.
Despite a low consumer confidence level, other favorable factors such as a higher population contributed to continued demand for retail space in the first quarter.
Retail also has been helped by low mortgage rates and a surge in home prices, which have boosted household income in Orange County and the U.S.
Vacancy
Vacancy rates for non-anchor retail space in OC have been on a downward trend since the first quarter of 2001.
But as vacancy has tightened, leaving less supply of quality space, the trend has begun to relax.
The vacancy rate for non-anchor retail space dropped slightly during the first quarter to 6.2%, down from 6.3% the previous quarter.
The highest vacancy rate remains in the specialty center category, primarily among entertainment-themed centers, though the vacancy rate for store space among specialty retail centers fell to 12.1% in the first quarter.
Net Absorption
Demand for retail space has been positive in OC despite the economic concerns facing the nation.
Neighborhood and community centers posted the strongest activity during the first quarter, combining for about 42,500 square feet of net absorption.
Offset by negative absorption of nearly 26,000 square feet in the power center sector, overall net absorption ended the quarter at a positive 25,551 square feet.
Lease Rates
The overall asking lease rate for retail space in OC fell one penny in the first quarter to $1.83 per square foot.
The slight decrease can be attributed to the leasing activity of more expensive shop spaces, leaving cheaper spaces with a higher weight in the calculated average.
The average asking rent is up 11 cents, or 6%, since the first quarter of last year. The Central Coast and South County areas reported the highest asking lease rates in the county, averaging $2.07 and $2.17 per square foot, respectively.
Construction
Construction on one new retail center started during the first quarter, adding 51,534 square feet to current activity.
The new specialty center,The Bluffs in Newport Beach,will house a number of restaurants and is set for completion during the summer.
No new centers completed construction during the first quarter.
