The office sector of the South Orange County market continued to show signs of strength in the fourth quarter. There was 328,511 square feet of positive net absorption that brought the total for 2012 to 1.1 million.
The steady demand has pushed down the vacancy rate for office space in South OC to 9.9%, the first time it’s fallen below 10% since 2007.
Lease Rates
The average asking lease rate held steady in the fourth quarter compared with the prior period, at $1.93 per square foot. That’s down 5 cents from the fourth quarter of last year, although the rate of decline has slowed and rents are projected to begin to slowly move up throughout next year. They peaked at the end of 2007 at an average of $2.81 per square foot.
The industrial sector in South OC also fared well in the fourth quarter, posting 251,300 square feet of positive net absorption to finish off what had been a spotty year through the first nine months of 2012. The year ended with 358,223 square feet of positive net absorption.
The overall vacancy rate for industrial space in South OC ended 2012 at 5.1%, down from 5.8% in the third quarter and 6.1% a year earlier.
Retail
The retail sector didn’t fare as well in the fourth quarter.
There was 69,075 square feet of negative net absorption for retail, although the vacancy rate dropped to 5.3% from 5.5% a year earlier.
Construction of significant new commercial space in South OC remains dormant, with work on some smaller-scale projects and renovations ongoing. Developers are waiting for a better sense of certainty on market fundamentals before moving forward with projects.
—Research and analysis provided by CBRE Research.
