Orange County’s manufacturing and warehouse sector, which consists of 5,706 buildings totaling nearly 211 million square feet, is the largest segment of the industrial market.
The vacancy rate dropped to 2% in the second quarter from the 2.3% recorded in the first. It fell from 2.4% a year earlier. West and South Orange County ended the quarter with vacancy rates of 1.7%, and the Greater Airport Area ended with 1.8%. The North Orange County submarket ended at 2.2%. Low vacancy rates, which have prevailed over the past several years, continue to put more pressure on rents.
Rents
The sector’s rents have increased 2 cents year-over-year from 61 cents per square foot in 2014’s second quarter to 63 cents per square foot in this year’s second quarter. The South Orange County submarket recorded the highest asking rent, 78 cents per square foot, up 4% from the first quarter and 11.4% from the same time last year. The airport area remained close behind at 71 cents per square foot, an increase of 9.2% over last year. The level of tenant demand and the lack of available space continue to move landlords to push rents higher, and they’ll continue to do so while the market is in their favor.
There was more than 2.7 million square feet of gross activity in the sector, generating 941,048 square feet of positive net absorption. That compares to the first quarter’s net absorption of 855,286 square feet. The North Orange County submarket contributed the most absorption, ending the quarter with 533,880 square feet, followed by West OC, with 266,429 square feet.
The Greater Airport Area submarket was the only one to experience negative net absorption, ending the quarter with negative 6,822 square feet.
Construction
Industrial development is starting to gain more traction. Construction continues on the Anaheim Concourse Distribution Center’s third phase.
Two buildings in Huntington Beach that total 144,754 square feet also remain under construction, and two buildings in Fountain Valley totaling 144,754 square feet broke ground.
Data and analysis provided by CBRE Research
