The South Orange County industrial market had a mixed first quarter, but its outlook is positive.
The market is made up of manufacturing and warehouse and research and development buildings. The research and development sector typically performs well and is particularly attractive to biotechnology companies due to the user base and the density of research and development buildings.
R&D Vacancy Rate
The vacancy rate for research and development, though, increased during the quarter by approximately 10% to 4.3%, while it declined 14.8% year-over-year. The sector recorded negative 4,855 square feet of net absorption in the first quarter compared with the negative 107,038 square feet of absorption in the fourth quarter.
The manufacturing and warehouse sector recorded positive net absorption, ending the quarter at 37,799 square feet. The sector had a decrease in vacancy from the fourth quarter, declining from 3.4% to 2.9%. Year-over-year, the vacancy rate was down 6.8%.
Combined, the South Orange County market totaled 32,944 square feet of positive net absorption in the first quarter, compared with the 157,441 square feet of negative net absorption in the fourth quarter. The overall vacancy rate decreased from 3.8% to 3.5%, reflecting a 7.9% decline quarter-over-quarter.
Asking Rate
The average asking rate in the manufacturing and warehouse sector increased from 71 cents per square foot to 75 cents, and the research and development sector’s rate decreased by 1 cent to 98 cents per square foot quarter-over-quarter. That brought the overall asking rate to 86 cents per square foot, a 2-cent increase from both the fourth quarter and the same time last year.
South Orange County average asking lease rates are expected to continue to rise due to a projected increase in demand.
Research and analysis provided by CBRE Research
