Retail Market:
Retail Market Strong With Tight Vacancy, Positive Absorption
The Orange County retail market shook off the challenges facing the office and industrial markets, continuing to improve last year with tightening vacancy rates, positive net absorption and climbing asking rents.
Vacancy Rates
The vacancy rate for retail shop space, which has gradually declined in the past two years, dropped again in the fourth quarter to 6.2%, down from 6.4% the previous quarter and 7.3% a year ago.
Central County, the market with the largest retail base, ended the fourth quarter with the county’s lowest vacancy rate at 5%, down from 7% a year earlier.
But all other markets remained at the single-digit level, too, with Central Coast leading the others with a vacancy rate of 7.4%, down from 9.3% a year ago.
Absorption
After three quarters of moderate, yet positive, activity in the retail market, net absorption jumped to 518,186 square feet in the fourth quarter.
Most of the quarter’s net absorption took place in six newly constructed centers, which were 82% leased at year-end. The fourth quarter activity pushed absorption for the year to 871,517 square feet, nearly three times that of 2001.
Lease Rates
With a high demand and low supply of quality retail shop space, OC asking rents climbed to $1.84 per square foot, an increase of 6% vs. a year earlier.
Lease rate rose four cents in the fourth quarter, led by a 16-cent increase in the community center sector where 58,000 square feet of newly constructed space entered the market vacant with asking rents ranging from $2 to $3 per square foot.
The average asking rent for community centers was $2.08 per square foot in the fourth quarter, up 8% in the prior quarter.
Construction
The retail market geared up for the holiday season with the completion of six new shopping malls with 1.5 million square feet in the fourth quarter.
Two specialty centers opened in the Central Coast market: the Crystal Cove Promenade and the third phase of the Irvine Spectrum entertainment center.
One power center, Amerige Heights Marketplace in La Habra, was completed in North County.
And one community center, the Old Ranch Town Center, was finished in West County.
South County gained the most new retail space with the opening of Plaza Pacifica, a 450,000-square-foot community center in San Clemente, and Foothill Gateway Plaza, a specialty center in Lake Forest.
The new construction added about 508,000 square feet of shop space to OC’s retail market, 18% of which was vacant upon completion.
Construction under way stands at slightly more than 2 million square feet, including three community centers and two specialty centers.
No new construction started in the fourth quarter.
Analysis provided by CB Richard Ellis’ Global Research and Consulting.
