Orange County’s industrial market regained some momentum in the third quarter after a relatively quiet first half of the year.
A signal of a strong market could be seen in the increase in the first upward tick on the average asking lease rate in nearly four years.
That came as many businesses began to take steps on growth plans, and looked to lock in low rents.
More expansions appear to be on the horizon, according to research from CBRE Econometric Advisors, which indicates that industrial employment is projected to grow by 9,100 jobs by the end of 2012.
The industrial market saw 541,781 square feet of positive net absorption countywide in the third quarter. That offset negative net absorption in the first part of the year and brought the year-to-date total to the positive side by 260,000 square feet.
M&W
The manufacturing and warehouse segment accounted for 806,307 square feet of the third quarter’s positive net absorption, a turnaround from negative 197,782 square feet posted the prior period.
The research and development segment had 264,526 square feet of negative net absorption, a setback from the 132,832 square feet of positive absorption in the prior period.
The North Orange County and Greater Airport Area submarkets both notched positive net absorption for the third quarter, with 255,253 and 550,109 square feet, respectively.
The South Orange County submarket saw 173,582 square feet of negative net absorption, while West Orange County was down 89,999 square feet.
The third quarter saw 2.8 million square feet of positive gross absorption in the industrial market, just ahead of the total for the same period a year ago. The year-to-date total for gross absorption is 8.1 million square feet.
The manufacturing and warehouse segment generated the majority of the third activity, accounting for 2.3 million square feet.
The research and development sector saw nearly 500,000 square feet.
The overall availability rate for the industrial market declined to 8.3% in the third quarter from 8.5% the prior period.
The South Orange County submarket ran counter to the general trend, with an increase in its availability rate to 12.3% from 11.1% in the prior period.
The availability rate for the manufacturing and warehouse segment was 8%. It was 9.7% for research and development space.
The overall vacancy rate for industrial space dropped to 3.9% in the third quarter from 4.2% the prior period.
The North Orange County and Greater Airport Area submarkets both had decreases in vacancy rates from the prior period, dropping to 3.6% and 3.5%, respectively.
The vacancy rate for manufacturing and warehouse finished the third quarter at 8% compared with 8.3% in the prior period.
The vacancy rate for research and development rose to 9.7% from 9.5% in the prior period.
The West Orange County and South Orange County submarkets both saw slight increases in vacancy rates, increasing to 3.2% and 7.1%, respectively.
60 Cents
The overall asking lease rate now stands at 60 cents per square foot, a three-cent increase from the prior period.
South Orange County had the highest average, at 77 cents per square foot.
North Orange County had the lowest rate at 48 cents per square foot.
The overall average asking sale price for the third quarter was $122.73 per square foot, an increase from $118.30 per square foot the prior period.
The West Orange County submarket saw the biggest quarter-over-quarter increase, jumping from $121.92 to $134.41 per square foot.
Nothing in Works
There is no new, speculative industrial construction of industrial product in Orange County.
One build-to-suit property is under construction, with retailer Tilly’s Inc. developing a 26,000-square-foot distribution facility in the Irvine Spectrum. That project is due for completion in the second quarter of next year.
Several projects have been put on hold indefinitely as developers look for more indicators of market stability.
Analysis provided by CBRE Research.
