While the Orange County industrial submarket continues to feel the strain of the current economic downturn, there was a slight uptick in activity and absorption during the second quarter.
The OC industrial submarket closed the second quarter with 1.8 million square feet of activity, up 8% from the first quarter, and a negative 704,734 square feet of absorption, which was a 60% improvement from the first quarter. These increases are still far below recent averages but can potentially be a sign of a market turnaround and increasing consumer confidence.
The South County industrial submarket was responsible for much of the negative absorption recorded in the second quarter, posting just more than 1 million square feet of negative absorption. The airport area saw the most activity of any submarket in the second quarter with slightly more than 800,000 square feet of activity, which represented roughly 45% of the total gross activity posted during the second quarter, followed by the North County submarket, which was responsible for about 30% of the total gross activity recorded in OC.
Both the availability and vacancy rates increased during the second quarter, with the availability rate increasing by 5% to 10.5%. Similarly, the vacancy rate in OC increased roughly 4% to 4.8%.
The West County industrial submarket was the only submarket in the county to register a decrease in its vacancy rate, which fell to 5.3% from 5.8% from the first quarter. But it also had the most significant increase in its availability rate, increasing by slightly more than 8% from the first quarter’s posted rate of 10.8%, to stand at 11.7% in the second quarter.
OC continues to see decreases in asking sale and lease rates, as the waning national economy is forcing landlords to offer competitive rates in order to attract the much smaller pool of tenants in the market than that seen in recent years. The decrease in average asking sale prices is not building specific as it was seen in both manufacturing and warehouse and research and development. Average asking sales prices for manufacturing and warehouse space have declined nearly $9 per square foot to stand at $147.18, while research and development prices shed more than $6 to stand at $180.50 per square foot.
The West County industrial submarket recorded the most noticeable decrease in its average asking lease rate, going from the first quarter’s posted rate of 62 cents to close the second quarter at 58 cents per square foot. The airport area was the only OC industrial submarket that did not see a decrease in its average asking lease rate. It remained unchanged from that of the first quarter, posting an average asking lease rate of 75 cents for the second quarter in a row.
Currently, there is one industrial building under construction, which is a 52,840-square-foot, built-to-suit in Fountain Valley. While OC did not see any new buildings complete construction during the second quarter, it did see a significant increase in the amount of planned buildings scheduled to begin construction. The North County industrial submarket saw the largest increase in planned industrial space adding seven new planned buildings to the list of future industrial buildings totaling more than 600,000 square feet of proposed construction.
Analysis provided by CB Richard Ellis Group Inc.
