The Orange County retail market posted a stable fourth quarter with the overall vacancy rate falling by 6% to 3%.
This decline in vacancy can be attributed to the additional 37,442 square feet of positively absorbed space in the quarter. There was more than 400,000 square feet of positive absorption last year.
Despite dropping fuel costs, the holiday season saw modest consumer spending. The holiday retail landscape seemed to shift this year as consumers held off much of their spending to the days after Christmas.
More than 2 million square feet of retail space is under construction. The rising cost of construction may have an impact on the projects under way.
Vacancy Rates
Another quarter without construction completions and continued strong demand for shop space resulted in an additional drop in the overall vacancy rate to 3%.
Redevelopment construction in some cities continues to take available retail space off the market while many tenants now are looking toward higher density, mixed-use developments.
North County and Central Coast area had the most dramatic vacancy drops in the fourth quarter, while West County held the tightest rate, 2.7%.
Net Absorption
There was more than 37,000 square feet of absorption in the quarter.
Central, South and West counties saw some negative absorption, while demand for North County space soared to produce more than 50,000 square feet of positive absorption.
Asking Lease Rates
Average rental rates ended the fourth quarter at $2.32 per square foot. Although the lease rate is a decline from third quarter’s rate of $2.35 per square foot, it does represent a 3 cent increase compared to a year ago.
Construction
No new retail space was delivered to the market in the fourth quarter. More than 2 million square feet is in the construction phase and is expected to be completed this year.
Projects under way include the Orchard at Saddleback with 279,000 square feet and the Arbor in Lake Forest with 165,000 square feet, which broke ground in the second quarter.
Data and analysis provided by CB Richard Ellis Research.
