The research and development market in Orange County had positive absorption of 253,100 square feet in the second quarter.
The R&D market remained tight and competitive, which has led to continued off-market transactions and users looking to adjacent geographical areas for space.
Absorption in Sectors
West Orange County, in contrast to the first quarter, had the majority of the positive net absorption, with 84,308 square feet. The Airport Area and South Orange County recorded similar absorption, with 65,448 and 60,028 square feet, respectively. The overall research and development market generated 492,856 square feet of gross activity in the quarter.
The West OC submarket also saw the largest amount in that category, with 160,342 square feet of gross leases and user sales.
The vacancy level for the research and development market stood at 2.3%, down from 2.9% from the first quarter. West Orange County held the lowest vacancy rate in the region, with 0.4%. That compared to the South Orange County submarket, whose vacancy rate was 3.7%, though it has a larger R&D inventory. North Orange County and the Airport Area fell between that spectrum with rates of 2.6% and 1.4%, respectively.
No new construction of research and development space is in the pipeline, so vacancy levels are expected to remain low through the remainder of the year.
Consistently low vacancy rates have continued to push asking rates upward throughout the market. In the second quarter, though, the overall average asking lease rate dipped 2 cents from the first quarter to 90 cents per square foot. It’s being viewed, despite the decline, as a market adjustment rather than an indicator of declining rents.
Asking Rates
The South Orange County submarket remained the premier location for research and development space, with an average asking rate of 99 cents per square foot. The Airport Area followed close behind with an average asking lease rate of 96 cents per square foot. Rents, as with vacancy levels, are expected to remain on an upward trend as steady demand continues.
Data and analysis provided by CBRE Research
