The Orange County retail market continued to see demand. Following a relatively flat third quarter, increased demand for retail space resulted in 68,814 square feet of positive net absorption. This kept the overall vacancy rate stable at 3.5%.
The average asking lease rate climbed an additional 2 cents to $2.51 per square foot. The higher lease rate places the OC retail market well above its Southern California neighboring counties.
More than 3.6 million square feet of retail space is under construction, including projects such as Orchard Hills Village Center, Woodbury in Irvine, The Strand in Huntington Beach, and Talega Village Center in San Clemente.
A Seal Beach neighborhood retail center, totaling 88,000 square feet, is just one of two retail centers that broke ground in the fourth quarter. Other projects, such as Phase II of the Commons in Irvine and Orangefair Marketplace in Fullerton, are some of the additional centers planned for the next two years.
Holiday shopping came in at a higher level than expected. Consumers rushed back into stores in November, driving retail sales at the fastest pace in four months.
Still, consumer confidence declined to 102.9 in November, down from 105.1 in October. A tighter labor market and a more guarded short-term outlook curbed consumers’ confidence in November, according to the Conference Board Consumer Research Center.
Vacancy
The OC vacancy rate held steady for the third straight quarter at 3.5%.
The Central Coast and West County saw a decline in vacancy rates. North and South counties saw their rates increase slightly, while Central County remained unchanged.
Despite the increase, the North County market has the tightest rate at 2.2%, while South County now carries the highest rate at 4.6%.
Of the center types, specialty centers continued to have the highest vacancy level, declining to 4.6% in the fourth quarter. Strip and power centers had the lowest vacancy rates at 2.7% and 3.1%, respectively.
Net Absorption
The fourth quarter saw increased demand, with posted 68,814 square feet of positive net absorption.
South County had the highest level of demand with 65,927 square feet of positively absorbed space.
Central County, on the other hand, saw negative net absorption of 3,622 square feet, which was concentrated in its neighborhood centers.
Overall, community centers in the county had 78,477 square feet of positive net absorption while neighborhood center types saw decreased levels of demand with 9,366 square feet of negatively absorbed space.
Asking Lease Rates
The average asking lease rate for retail space continues to rise, increasing an additional 2 cents this quarter to $2.51 per square foot. This growth represents an 8% year-over rise and a 1% increase from the third quarter.
West County has the widest range of lease rates, from a low $1 per square foot at strip centers to a high $6 per square foot at neighborhood centers.
Average asking high rental rates also have reached the $6 mark in the North and Central counties and the Central Coast.
Power centers hold the highest average asking rent at $3.04 per square foot, while strip centers are the lowest at $2.34 per square foot.
Construction
The fourth quarter saw the completion of the 50,900-square-foot Terrace Shops in Ladera Ranch. The Arbor in Lake Forest completed renovation of its 157,000-square-foot community center.
Two new centers totaling 304,000 square feet broke ground in the fourth quarter and began construction: the Seal Beach Center in Seal Beach and the Imperial Promenade redevelopment in La Habra.
These projects have brought the total amount under construction to 3.6 million square feet.
Retail centers still slated for construction include The Commons Phase II in Irvine, Orangefair Marketplace and Imperial promenade.
