Despite the cooling trend of the industrial market in the first quarter of the year, the manufacturing and warehouse sector remained extremely tight. Of course, the market indicators for the M & W; market did turn along with the rest of the industrial product. However vacancy was so low at the end of last year that the trend had nowhere to go but up, and it barely crawled up at that. By the end of the first quarter, the vacancy rate for M & W; space rose to merely 1.1%. North Orange County, which accounts for nearly half of the M & W; base, ended the first quarter with virtually no vacancy (less than 1%).
The national labor force in the manufacturing sector began to drop in the third quarter of 2000. However, Orange County’s manufacturing sector prospered in the first quarter of 2001, with the addition of approximately 1,500 jobs, while national manufacturing employment continued to dwindle.
Although the demand for M & W; space continued, availability of quality space did not. The vacant spaces on the market offered little solution to incoming or sizable tenants as they were either too small or of poor quality. Only 16 of the vacancies in the market in the first quarter were spaces larger than 50,000 square feet. More than 100 spaces began marketing potential opportunities for lease or sale in the first quarter, bringing the total available in the market to 11 million square feet. However, nearly half of these spaces fall into the 10,000- to 19,999-square-foot range. It has become necessary for some manufacturing tenants to pursue alternatives in neighboring areas where there is greater availability of space.
In response to the lack of quality available space in the market, M & W; construction activity increased in the first quarter of this year to 1.6 million square feet.
