The greater Airport Area’s industrial real estate sector took a step back during the second quarter of 2012 compared to the first quarter.
Gross activity for the quarter was 901,264 square feet, down 16% compared to the first quarter. Gross activity increased by 7% when compared with the second quarter of 2011. Irvine continued to lead the pace of absorption with 71% of the gross activity for the quarter.
The decrease in gross activity also continued to affect the net absorption for the quarter. Net absorption in the area around John Wayne Airport totaled 370,917 square feet. The research and development sector was the most affected by the negative net absorption, giving up 231,000 square feet. The manufacturing and warehouse sector was less affected by the slowdown, with only 139,000 square of negative net absorption.
But the negative net absorption has had the opposite effect on manufacturing and warehouse lease rates and sale prices.
Lease Rates
The average asking lease rate for manufacturing and warehouse product was 60 cents per square foot, compared to 55 cents per square foot at the end of the first quarter and 53 cents per square foot in second quarter 2011. Asking sales prices have also increased during the second quarter, to $124 per square foot from $121 per square foot in the first quarter.
The average asking lease rate for research and development space was 68 cents per square foot, compared to 84 cents per square foot at the end of the first quarter and 79 cents per square foot in second quarter 2011.
The amount of vacant square feet in the airport area increased during the second quarter to 2.6 million square feet, up 16% from the first quarter but down almost 9% from a year earlier. Irvine held the highest vacancy rate at 5.1%, followed by Santa Ana at 3.7%.
Overall, the second quarter showed signs of the fragile balance between real estate optimism and business reality. The airport area market may stabilize during the third quarter amid improving economic conditions and begin to gain momentum for the fourth quarter.
Wright 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.
