The Greater Airport Area industrial real estate market performed well in the third quarter and is projected to finish out the year strong.
The submarket covers parts of Costa Mesa, Irvine, Fountain Valley, Santa Ana, and Tustin, and consists of just over 2,000 buildings totaling approximately 69 million square feet. It’s broken down into research and development and manufacturing and warehouse properties, with the majority of the submarket made up of the M&W sector, which accounts for approximately 79% of the inventory.
Vacancy, Absorption
The overall vacancy rate in the Greater Airport Area dropped from 1.7% in the second quarter to 1.2% at the end of the third quarter. Vacancy rates dropped by 53.8% year-over-year from 2.6%.
Vacancy levels in the manufacturing and warehouse sector dropped from 1.7% in the second quarter to 1.3%, and the R&D market declined from 1.4% to 0.9%.
Demand remained healthy as the submarket generated positive net absorption in the amount of 287,098 square feet. That brought the year-to-date total to 922,095 square feet of positive net absorption.
The submarket is experiencing an increase in property conversions to residential, particularly in Irvine. The shift, coupled with minimal new construction and sustained demand, is projected to help continue bringing vacancy rates down.
The overall average asking lease rate declined year-over-year, dropping from 74 cents per square foot to 73 cents.
The average asking rent for research and development facilities was $1.06 per square foot, up 16.5% from a year earlier, while the manufacturing and warehouse asking rent remained at 71 cents per square foot, which is up 2.9% year-over-year.
It’s forecasted that asking lease rates will continue to increase through the rest of the year as the market continues to tighten with increased demand from users.
Asking Sale Prices
Asking sale prices also continued their upward trajectory as the price for an industrial building in the submarket was $195.46 per square foot, an increase of about $55 per square foot, or 39% over asking sale prices a year earlier.
The average asking sale price for an M&W property is $189.43, while R&D properties had an average price of $214.91 per square foot.
It’s projected that sale prices will continue to increase through the rest of the year as owner-users continue to gain confidence in their businesses and interest rates remain at near-record lows.
Analysis provided by CBRE Research
