The Greater Airport Area submarket performed well overall in the fourth quarter, and market fundamentals were strong.
The submarket, which includes the cities of Costa Mesa, Irvine, Fountain Valley, Santa Ana and Tustin, consists of more than 2,000 buildings totaling approximately 69.1 million square feet. It’s broken down into research and development and manufacturing and warehouse properties, the majority, or approximately 79% of the total inventory, in the latter category.
Vacancy Rate Down
Vacancy rates in the submarket have decreased 57.7% from the 2.6% recorded in the fourth quarter of 2014.
The overall vacancy rate dropped from 1.2% to 1.1% in the fourth quarter.
Vacancies in manufacturing and warehouse properties dropped from 1.3% in the third quarter to 1.1%, and the research and development market’s rate increased from 0.9% to 1.1%.
Demand remained healthy as the submarket generated positive net absorption in the amount of 70,220 square feet, bringing the annual total to 992,315 square feet.
The submarket is experiencing an increase in property conversions to residential, particularly in Irvine. That, coupled with minimal new construction and sustained demand, is expected to result in vacancy rates’ continued drop.
Asking Rates
The overall average asking lease rate experienced a slight increase year-over-year from 73 cents per square foot to 74 cents.
The average asking rent for research and development facilities was $1.35 per square foot, up 55.2% over a year earlier, and the manufacturing and warehouse asking rent increased to 73 cents per square foot, up 4.3% year-over-year.
Tight
The market continues to tighten due to increased user demand, and it’s forecasted that asking lease rates will continue to increase in the early part of this year.
Asking sale prices also continued their upward trajectory in the fourth quarter. The price for an industrial building was $197.73 per square foot, an increase of about $54 per square foot, or 37%, over the asking sale prices recorded a year earlier.
The average asking sale price for manufacturing and warehouse properties was $191.55, and research and development properties had an average price of $220.03 per square foot.
It’s projected that sale prices will continue to increase as owner-users gain more confidence in their businesses and interest rates remain at near-record lows.
Analysis provided by CBRE Research
