The Orange County retail market continued to experience overall improvements as demand was driven upward by a limited amount of class A properties.
The market remained steady, with only minor changes from the first quarter. Orange County completed the quarter with a vacancy rate of 4.6%, up from 4.5% in the first quarter.
Changes in the county’s overall retail vacancy have been minor over the past few quarters, largely due to desirable premier space being quickly occupied while time-worn properties remain vacant and on the market.
Tenant demand is strong, although a spotty performance saw another quarter of negative net absorption, ending with negative 87,726 square feet.
North and West Orange County also had negative absorption, with a combined net total of negative 45,156 square feet. Central Coast and South Orange County had positive absorption, recording 4,211 square feet and 5,588 square feet, respectively.
Four of the five retail center types had negative absorption. Specialty and strip centers posted the highest, with negative 33,704 square feet and negative 34,629 square feet, respectively. Neighborhood and power centers followed with negative 25,088 square feet and 14,552, respectively. Community centers generated the only positive net absorption, with 20,247 square feet.
Retail tenants are continuing to look toward expansions, with several small construction and proposed projects littered throughout the region. Real gross domestic product will likely dip slightly due to drops in store inventories and reduced investment spending by the oil industry, though business momentum is anticipated to notably increase in the second half of the year.
Multiple minor projects continue to be under construction in the region as overall proposed retail is on the rise in Orange County. Development on Pacific City in Huntington Beach continues, with a projected delivery date of September.
Construction on The Source at Beach in Buena Park continues as the project is slowly reaching completion. It’s scheduled to be delivered early next year. The first phase of the Outlets of San Clemente also remained in development and is anticipated to open this year.
Hill is a senior analyst at CBRE.
