A surge of activity at the end of last year in the Greater Airport Area’s industrial market leveled off in the first quarter as the office market continued to chip away at a significant amount of vacant space.
The airport area has 68.6 million square feet of industrial space and saw 373,944 square feet of negative net absorption in the first quarter. Manufacturing and warehouse buildings accounted for nearly the entire downward trend.
The result was an increase in vacancy for the manufacturing and warehouse sector to 5% from 4.4% for the prior quarter.
Research and development space accounted for a small fraction of the negative net absorption in the first quarter. The sector’s vacancy rate rose to 4.2% from 4%.
Average asking lease rates for manufacturing and warehouse buildings fell three cents from the prior quarter to 50 cents per square foot. That continued a trend of declines and amounts to a 13.8% drop from a year earlier.
The research and development sector saw a five-cent jump in average asking lease rates to 80 cents a square foot.
The airport area office market continued to show signs of life with 638,523 square feet of positive absorption in the first quarter. The vacancy rate dropped to 17.2% from 19.4% at the end of the 2010.
Landlords offered bargains, and average asking rents continued to fall, dipping three cents from the prior quarter to $2.02 per square foot. Concessions such as initial free rent and tenant improvements also still are prevalent.
There are anecdotal indicators of a growing consensus that the market is stabilizing despite the spotty performance of the industrial market in the first quarter.
Further improvements in the airport area markets will be dependent on increases in activity across all sectors.
Zanolli is an Associate in the Newport Beach office of CB Richard Ellis.
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