The Orange County research and development market remained tight in the third quarter.
The market, which totals more than 43 million square feet of space, had negative absorption of 163,972 square feet, and South Orange County was the only submarket that experienced positive net absorption, with 63,696 square feet absorbed during the quarter.
The research and development market generated 247,835 square feet of gross activity.
Transactions
Significant transactions that occurred included ITT Cannon Corp. leasing 71,054 square feet and Thales USA leasing 61,761 square feet, both in the Irvine Spectrum.
Gross activity levels decreased nearly 60% from the second quarter, a change that can be partly attributed to the continuous low vacancy rates in the market.
Research and development had a vacancy rate of 3.2% at the end of the quarter, a 14.8% increase from the second quarter and an 8.1% decrease year-over-year.
North Orange County and West OC had the lowest vacancy rates in the quarter, each at 2.7%. The majority of vacant research and development space continued to be in the Greater Airport Area and South OC submarkets, which ended the quarter with 3.1% and 3.9% vacancy rates, respectively.
Consistently low vacancy rates have in turn led to consistently high average asking lease rates in the market.
County, South OC
Overall, Orange County had an average asking lease rate of 89 cents per square foot, triple-net, down just 3 cents from the second quarter and year-over-year.
The South OC market remained the premier area for research and development space, with an average asking lease rate of 96 cents per square foot, the most expensive among the submarkets in the county.
As demand rises in Orange County, tenants will be forced to pay higher rates as a lack of construction in the R&D sector, combined with the low vacancy rates, will allow landlords to continue to charge a premium for quality space.
Data and analysis provided by CBRE Research
