The vacancy rate in the manufacturing and warehouse sector has been on a downward trend over the past 12 months, decreasing from 2.5% in the first quarter to 2.4% at the end of the second. Space is tight throughout Orange County and has been a challenge for tenants looking for quality space.
The sector consists of 5,694 buildings totaling more than 209 million square feet.
Vacancy Rates
The North Orange County submarket continued to hold the lowest vacancy rate, 1.8%, followed by West Orange County, with a 2.3% rate. South Orange County and the Greater Airport Area ended the quarter with rates of 3.9% and 3.1%, respectively.
Year-over-year, the overall vacancy rate in the manufacturing and warehouse sector dropped 20%.
The market, with approximately 1.6 million square feet of gross activity, recorded 324,852 square feet of positive net absorption.
North Orange County recorded the majority of the absorption, ending the quarter with 514,954 square feet. West OC recorded 50,387 square feet of positive net absorption, and South Orange County and the Greater Airport Area recorded negative absorption, ending with negative 150,056 square feet and negative 90,433 square feet, respectively.
Average asking lease rates remained relatively flat throughout 2013. The first half of this year, however, saw continuous increases, ending the second quarter at 61 cents per square foot overall. The average asking lease rate increased 3 cents year-over-year. The highest asking rate continued to be in South Orange County, at 70 cents per square foot.
Overall, lease rates are expected to continue their climb over the next 12 months.
Commercial Development
Commercial development in the Orange County region is slowly making a comeback. In the industrial sector, all of the current development is manufacturing and warehouse space in the North and West Orange County submarkets. The current square footage under construction totaled 1.1 million square feet at the end of the second quarter.
Speculative development remained in the pipeline, and we should see more development commencing over the next 12 months.
Data and analysis provided by CBRE Research
