The overall Greater Airport Area industrial real estate market performed well in the second quarter, a showing that’s projected to continue moving into the latter part of the year.
The market, which includes Costa Mesa, Irvine, Fountain Valley, Santa Ana and Tustin, consists of just over 2,000 buildings totaling approximately 69 million square feet. The submarket is broken down into research and development and manufacturing and warehouse.
Vacancies
The overall vacancy rate in the submarket remained 1.8% at the end of the second quarter. Vacancy rates, compared to a year earlier, decreased from the 3% recorded in the second quarter of 2014 to 1.8%. Vacancy levels in the manufacturing and warehouse sector remained constant, also finishing at 1.8%, whereas the research and development market saw a decline from 1.9% to 1.4%.
Demand remained healthy as the submarket generated 58,626 square feet of positive net absorption. That brought the year-to-date total to 597,416 square feet of positive net absorption.
The submarket is seeing an increase in property conversions to residential uses, particularly in Irvine. That, coupled with minimal new construction and sustained demand, will continue to push vacancy rates down.
The overall average asking lease rate increased 8.6% year-over-year to 76 cents per square foot. The average asking rent for research and development facilities was 96 cents per square foot, up 6.7% from a year ago, whereas the manufacturing and warehouse asking rent was 71 cents per square foot, up 9.2% year-over-year.
It is forecasted that the asking lease rates will continue to increase throughout the year by another 7% or more as the market continues to tighten with increased user demand.
Asking Sale Prices
Asking sale prices also continued their upward trajectory as the price for an industrial building in the submarket was $180.01 per square foot, up about $24 per square foot, or 29%, from the asking sale prices recorded 12 months earlier. The average asking sale price for M&W properties was $168.47, while R&D properties had an average price of $199 per square foot.
It is projected that sale prices will increase approximately 8% this year as owner-users continue to gain more confidence in their businesses and interest rates remain at near-record lows.
Analysis provided by CBRE Research
