Orange County’s research and development market experienced negative net absorption of 26,363 square feet in the fourth quarter, marking two consecutive quarters of negative net absorption.
The slight dips over the past six months came on the margins of a 44-million-square-foot market that remained tight and competitive, which has led to continued off-market transactions and users looking to adjacent geographical areas for space.
The South Orange County submarket represented the only positive net absorption during the quarter: 27,879 square feet. Conversely, North Orange County and the Greater Airport Area ended the quarter with negative net absorption of 21,741 square feet and 32,501 square feet, respectively.
The overall research and development market generated 680,218 square feet of gross activity, nearly double that of the third quarter. The annual gross activity total came to just over 1.7 million square feet, only slightly above 2014’s 1.7 million square feet.
The market’s vacancy level stood at 2.3%, a 4.5% increase over the previous quarter but a 17.9% decrease from the fourth quarter of 2014.
The Greater Airport Area held the lowest vacancy, at 1.1%, dropping from the 2.4% rate recorded in the fourth quarter of 2014. That compared to the South Orange County submarket’s 4% rate. North and West Orange County fell between that with rates of 2% and 2.2%, respectively.
There’s no new construction of research and development space in the pipeline, so vacancy levels are projected to remain low.
Consistently low vacancy rates have continued to push up asking rates throughout the market. Rates increased to 98 cents per square foot, up 9 cents over the rate recorded a year earlier.
The South Orange County submarket remained the premier location for research and development product, with an average asking rate of $1.01 per square foot. The Airport Area, which increased 55% year-over-year, surpassed South Orange County, ending the quarter at $1.35 per square foot. North Orange County also recorded a $1.01 per-square-foot rate.
Rents are projected to keep rising as demand stays steady.
Data and analysis provided by CBRE Research
