The Orange County retail market has had a stable year of gradually recorded improvements. The region continues to exhibit promising year-over-year changes in retail fundamentals, as shown through year-to-date positive absorption, strong asking lease rates, and steadily shrinking vacancy.
A median household income higher than all neighboring counties, at $77,162, coupled with a retail per capita footprint of 45.1 square feet, make Orange County an affluent and retail-dependent population. Strong growth projections paired with steady visitor numbers have positioned the region as the ideal location for a number of retailers and a premier destination with trophy properties that include South Coast Plaza, Fashion Island, and Irvine Spectrum.
Low Vacancy
Orange County’s overall retail recorded no change in vacancy in the second quarter at 3.8%. The rate reflects a low not seen in the market since 2007 and illustrates the regional retail real estate stability. That compares to a year-over-year decrease and projections of further shrinkage as the year continues.
Two of Orange County’s five major submarkets dropped in vacancy, the largest of which was West Orange County, with an overall decrease from 3.9% to 3.6%, much of it due to leasing activity at Pacific City in Huntington Beach.
The Central Coast submarket shrank in vacancy from 2.7% to 2.6%. Increases were minor, with Central Orange County rising from 4.9% to 5% and North Orange County growing from 3.7% to 3.9%. South Orange County stayed at 2.8%.
Net absorption fell into the red, ending the quarter at negative 6,218 square feet; though year-to-date net absorption remained positive at 331,170 square feet.
The bulk of the negative net absorption was in Central Orange County, at negative 34,882 square feet, driven by a series of minor move-outs and 22,015 square feet vacated by Office Depot.
Orange County absorption historically has trended negative in the second quarter. This particular quarter was an improvement from year-earlier figures, when the region reported negative 56,697 square feet. Leasing is anticipated to pick up through the summer.
Hill is a senior analyst at CBRE.
