The overall vacancy rate for retail space in Orange County dropped in the second quarter to 8.0%, down from 8.4% at the beginning of the year. The drop in vacancy was led by the demand for space in South Orange County, where the vacancy rate dropped below 5%, to just 4.8% in the second quarter. The largest South County vacancy drops were seen in the neighborhood center and specialty center sectors, where the first quarter’s vacancy rates stood in excess of 13%. This quarter, the vacancy rate for neighborhood centers in South Orange County fell to 7.1%, and specialty center vacancy dropped to just 4.3%.
Despite the uncertainty of the economy affecting tenant decisions, net absorption has remained positive in the Orange County retail market throughout the first half of 2001. In the second quarter, the market experienced nearly 78,000 square feet of positive absorption, bringing the year-to-date absorption figure up to more than 140,000 square feet. The majority of positive activity during the quarter was seen in South Orange County, where residential growth has supported the demand for retail shop space. Approximately 207,000 square feet were absorbed in the South County market, largely due to the completion of the 120,000 square-foot neighborhood center in Ladera Ranch, which entered the retail base 100% leased.
The average asking lease rate for retail space dropped 1 cent in the second quarter to $1.71 per square foot per month, after stabilizing in the first quarter at $1.72. The Central Coast market area continued to dominate the rent scale with an average rate of $2.07 per square foot, 21% greater than the average asking rent of the county. North Orange County experienced the greatest average rental increase in the second quarter: 15 cents, to $1.70 per square foot. The average asking lease rate for the power center sector increased 12% to $1.91, due largely to the opening of new space in North Orange County, which increased the power center rate in that area by 45 cents per square foot.
Proving the continued vitality of the Orange County retail market, construction activity increased in the second quarter to nearly 2 million square feet, up from 1.1 million square feet in the previous quarter. Two new projects, one community and one specialty center, broke ground in North Orange County, adding 680,000 square feet to the construction activity. Another community center, Old Ranch Town Center in Seal Beach, broke ground in the second quarter, and will add 300,000 square feet to the West Orange County base upon completion. n
