The Office Market
The office market in South Orange County is one of the healthiest in the county, making up approximately 18% of the total county market. In the second quarter, there was high activity in South Orange County with 513,568 square feet of positive net absorption, bringing total absorption for the first half to nearly 1 million square feet. The vacancy rate increased to 10.50% from 9.15% in the first quarter, primarily due to the addition of newly developed, non-preleased office product. The average asking rate in South Orange County continues to be the highest in the OC market, rising to $2.25 from $2.20 in the first quarter, up 7.7% from the previous year. Construction activity continues to be strong, with nearly 2 million square feet under way in the South Orange County office market.
The Industrial Market
Approximately 12% of the county’s industrial market is in South Orange County. Manufacturing and warehouse space in South Orange County accounts for less than 10% of the M & W; product in the county, but South County is the second-largest research and development market in the county. In the second quarter, M & W; availability dropped to 7.90%, down from 10.21% in the first quarter. R & D; availability also dropped, to 14.3% from 16.03% in the first quarter. South Orange County experienced a positive net absorption totaling 462,618 square feet in the second quarter, mostly due to the strong M & W; net activity of 286,300 square feet. The average asking lease rate for M & W; in the second quarter dropped a penny to 66 cents, while the R & D; average remained 83 cents. As newer projects with higher asking rents are being absorbed, older spaces with lower rents are increasing in availability, causing the appearance of declining or stabilizing rents, when in actuality, the average asking prices in the market are on the rise.
The Retail Market
The South County market is the second-largest retail market in Orange County, with more than 15 million square feet of gross leasable area. The vacancy rate for the South Orange County retail market increased to 8.01% in the second quarter from 6.28% in the first, while the average asking rate continued its inflation, to $1.82 from $1.73 in the first quarter. As of the second quarter, nearly 40% of the total retail construction under way in OC was in the South Orange County market, consisting of one community center, one neighborhood center and one power center.
