The Orange County retail market ended 2015 with minor but notable improvements that are continuing to propel the region forward.
Orange County continues to display promising shifts in retail fundamentals as displayed through increasing construction activity, growing retail rates and shrinking vacancies. Demand by new and existing retailers remains steady. Service-based retail tenants remain a hot trend both nationally and locally, with landlords utilizing prime retail space.
Orange County, the 17th largest retail market tracked by CBRE Econometric Advisors, is a prime example of the trends, accounting for over 2% of overall national retail sales and a projected positive outlook for the year.
It maintained an unchanged but relatively low vacancy rate of 4.4%. Much of the market’s vacant space can be attributed to the Haggen grocer’s exit in the fourth quarter. The rate reflects a year-over-year decrease from 4.5%, with further decreases forecasted for this year.
Three of OC’s five major submarkets experienced an increase in vacancy. The largest increases were recorded in Central Orange County and Central Coast.
The county generated 52,089 square feet of negative net absorption during the quarter, though it managed to conclude the year with a year-to-date total of positive 17,197 square feet. The negative recorded absorption in the quarter was partially due to Haggen’s moveout.
The submarket with the most negative absorption was Central Orange County, with a recorded negative absorption of 84,725 square feet.
Minor development projects can still be found throughout Orange County, while large-scale construction remains slow.
The largest project continues to be the 400,000-square-foot regional center called The Source at Beach in Buena Park. The project’s delivery date has been pushed to midyear.
The Pacific City project also has been added to the market. The Huntington Beach specialty center is listed as still in development, though a quarter of its retail tenants are open for business. The final project should be ready by spring.
Hill is a senior analyst at CBRE Research.
