Orange County’s retail market—which is made up of 500 centers and nearly 30.6 million square feet of shop space—saw its vacancy rate rise to 5.8% in the fourth quarter, up from 5.7% in the prior period and even with a year earlier.
The change came as demand slowed and the market posted 55,000 square feet of negative absorption.
Central, West OC
The majority of the vacancies were in the Central OC and West OC submarkets, where a few large vacancies remain despite a recent decline in the amount of big-box space available.
The average asking rates for leases declined by 8 cents to $2.19 per square foot in the fourth quarter compared with the prior period.
Asking rents for space in the Central Coast area saw a substantial increase last quarter, going as high as $6.50 per square foot despite the countywide decline.
Specialty centers and buildings in markets such as Newport Beach, Corona del Mar, Laguna Beach and parts of Costa Mesa are commanding their highest prices ever, fueled by a limited supply and a growing list of retailers and restaurants eager to tap into the area’s affluent communities, strong local economy, and thriving tourism.
Orange County’s retail market also has drawn the attention of some of America’s largest institutional owners and local investors alike, who are committing significant capital to acquisitions, refinancing and renovations of a number of properties, driving prices up and cap rates down to record levels.
Outlook
The outlook for the OC retail market points to improvement in both vacancy rates and asking rental rates as new retail development remains sparse and consumer confidence continues to improve. The strength of the local retail market, which is ranked fifth nationally, may continue to be driven by a diverse mix of industries and a thriving housing market.
Crocenzi is a senior vice president in the Newport Beach office of CBRE Group Inc.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
