Consumer confidence is pushing retail sales and encouraging retail expansion, resulting in increased Orange County occupancy rates.
The overall vacancy rate improved 2.2% in the fourth quarter to 4.5%, and year-over-year vacancy declined 8.1%.
Asking Lease Rates
The overall asking lease rate for OC retail space was flat at $2.07 per square foot. CBRE Econometric Advisors, though, forecasts average lease rates to increase 2.9% over the next year.
Asking lease rates increased the most among specialty centers over the previous quarter, ending at $2.45 per square foot, a 25% jump.
Increasing tenant demand and overall activity translated into 121,463 square feet of positive net absorption. It was the sixth consecutive quarter with positive net absorption and brought the annual total to 252,206 square feet.
Neighborhood shopping centers showed significant improvement, generating nearly 100,000 square feet of positive net absorption and lowering vacancy to 5.5% from the 6% recorded in the third quarter. They are considered one of the most consistent and stable types of centers and are demonstrating resilience.
Companies that are expanding include Dick’s Sporting Goods, Wells Fargo, Jimmy John’s Gourmet Sandwiches, and a new entry, Tropical Smoothie Café. Tenant demand has been steadily increasing, and activity continues to fill the pipeline.
The Haggen supermarket chain, which is based in Bellingham, Wash., recently opened 11 stores in Orange County, providing an exciting new entry in the competitive California market. The combination of Safeway and Albertsons resulted in the divestiture of 88 stores in California that Haggen took advantage of, including former Vons and Albertsons locations in Irvine, Newport Beach, Laguna Beach, Laguna Niguel, Trabuco Canyon, Mission Viejo, Ladera Ranch, Tustin and Yorba Linda.
Development
Development in the Orange County retail market has been slowly emerging. The Source in Buena Park remains under construction and is expected to be delivered in the second quarter of 2016.
The 345,000-square-foot first phase of The Outlets at San Clemente also is under construction.
Woodward is a first vice president at CBRE. Data and analysis provided by CBRE Research.
