The Orange County manufacturing-and-warehouse market continues to see a dwindling supply of space as demand grows. Activity has increased across the county, with 570,372 square feet of positive net absorption in the first quarter.
Activity levels continued to climb, leading to an overall lower vacancy level of 2.7%. The overall asking lease rate for manufacturing-and-warehouse space decreased 1 cent to 56 cents per square foot, up 2 cents from a year ago.
Gross activity for the manufacturing-and-warehouse market was 2.1 million square feet.
North OC
The bulk of the quarter’s activity came in the North Orange County submarket, which had 999,225 square feet of gross leases and user sales. The North OC vacancy rate was 2.4%, so it’s anticipated the gross activity will start to slow.
Limited supply of functional industrial space is being met with increased demand as the economy continues to recover. The results will be twofold: First, asking rents are expected to increase. Second, new development is expected to start. Both are actually already starting to happen.
Asking rents for manufacturing-and-warehouse space have slowly climbed over the past year. The average asking lease rate likely decreased due to the fact that the highest-priced buildings, which are also the most-available buildings, have been steadily absorbed and taken off the market.
South OC continues to demand the highest lease rate, at 65 cents per square foot, while North Orange County demands the lowest at 50 cents per square foot.
Combining high demand, decreasing availability, and rising lease rates, it is understandable that developers are on the move.
2007
Industrial development is back in “a big way” in Orange County for the first time since 2007. Different than 2007, however, is the type of product being built: large distribution centers instead of small buildings and condo projects.
Currently, buildings totaling roughly 1.2 million square feet are under construction in Orange County, all of them in North OC. An additional 2 million square feet to 4 million square feet of industrial buildings are in the planning phase.
Sean Ward is a first vice president at CBRE Group.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
