The Research and Development market in Orange County marked three consecutive quarters of negative net absorption in the first quarter, with 157,668 square feet.
The negative absorption amounted to a small fraction of the 43.7 million-square-foot market, which remained tight and competitive, with off-market transactions and users looking to adjacent geographical areas for space, accounting for the lack of activity.
The South Orange County submarket represented the only positive net absorption during the quarter, with 19,114 square feet. Conversely, North Orange County and the Greater Airport Area ended the quarter with negative net absorption of 98,200 square feet and 20,668 square feet, respectively.
The overall market generated 212,034 square feet of gross activity, representing a 24.7% increase from a year earlier.
The market’s vacancy level stands at 2.4%, up from 2.1% in the fourth quarter but a 7.7% decrease from a year earlier. The Greater Airport Area held the lowest vacancy at 1.3%, dropping from the 1.9% vacancy rate recorded a year earlier. That compared to the South Orange County submarket, whose vacancy rate was 3.7%. North and West Orange County fell between that spectrum with rates of 3% and 1.5%, respectively.
There’s no new construction of research and development space in the pipeline, so vacancy levels are projected to remain low throughout the year.
Consistently low vacancy rates have continued to push asking rates upward throughout the market. Rates have been increasing, for the most part; however, the first quarter recorded a rate of 95 cents per square foot, representing a decrease of 3 cents from the fourth quarter. Rates were still up 3.3% year-over-year.
The South Orange County submarket remained the premier location for research and development product, with an average asking rate of $1 per square foot. The Airport Area, increasing 60% year-over-year, surpassed the South Orange County submarket in terms of asking rates, ending the quarter at $1.44 per square foot.
Rents are expected to remain on an upward trend as steady demand continues.
Data and analysis provided by CBRE Research
