Since the start of the year, activity in the office and industrial markets appears to have picked up in the John Wayne Airport area, but transactions remain slow.
That momentum started in the fourth quarter, marking a slight turnaround from a slow 2009.
In the greater airport area’s industrial sector, year-end vacancy for manufacturing and warehouse buildings was up 25% and research and development vacancy was up 48.3% from a year earlier.
But it started to see deals late last year.
With a base of 68.6 million total square feet, the market recorded 134,582 square feet of absorption in the fourth quarter, split pretty evenly between warehouses at 67,297 square feet and research and development buildings at 67,285 square feet.
This absorption resulted in a slight decrease in vacancy for both types of space: manufacturing and warehouses saw vacancy dip from 5.1% to 5%, and research and development buildings dropped from 4.4% to 4.3%.
These dips are viewed as positive for the market and suggest that there are finally some signs of stabilization occurring.
Average asking lease rates for manufacturing and warehouse buildings in the fourth quarter was 61 cents per square foot, down from 62 cents in the third quarter. This small decrease in rents is another sign of stabilization for a market that saw average asking rents drop 18.7% for the year.
The research and development market, meanwhile, was not as stable during the fourth quarter, as rents dropped 6 cents per square foot, or 13.3% for the year.
Office Market
Meanwhile, the greater airport area’s office market continued its downward spiral in the fourth quarter as increasing vacancy and reduced demand continue to be the primary contributors to declining lease rates.
The average asking monthly rent for office space in the submarket was $2.31 per square foot, down 8 cents from the third quarter and 37 cents for the year. The quarter ended with a 19.5% vacancy rate, which is up from 18.8% in the third quarter. This represents a year-over-year increase of 18.2%.
On a slightly more positive note, the rate of negative absorption in the submarket slowed in the fourth quarter to slightly more than 291,986 square feet—representing about 20% of 2009’s annual total of 1.4 million square feet.
Looking ahead, recovery in both the industrial and office sectors is dependent on one key economic factor: job growth. Until unemployment levels decline and jobs start being created again, positive absorption, increased lease rates and lower vacancy will continue to elude the greater airport area.
Zanolli is a sales assistant in the Newport Beach office of CB Richard Ellis Group Inc.
