North and Central Orange County saw mixed results in the first quarter, but overall those commercial markets do appear to be on a slow road to recovery.
Occupancy levels vary from sector to sector, and decreased lease rates are a common thread.
The North and Central markets include more than 3,400 commercial properties totaling almost 180 million square feet and—with the exception of the office sector—hold an average vacancy rate below 10%. Construction of new buildings in the submarkets remains almost nonexistent, with only 84,350 square feet of industrial space in the development phase.
Demand continued to show positive momentum through the first quarter of the year: There was 362,000 square feet of positive net absorption across all product types year-to-date.
Office Properties
The vacancy level for office space in North and Central OC declined this quarter to 14.9% from 15% in the fourth quarter of last year. That increased occupancy can be partially attributed to 22,961 square feet of positive net absorption that occurred this quarter.
The average asking lease rate for available space in these submarkets continues to decrease, dipping an additional 2 cents from the previous quarter to $1.79 per square foot. The lease rate stood at $1.86 per square foot a year ago.
Industrial Properties
The industrial market is made up of 2,540 manufacturing and warehouse buildings and 189 research and development buildings. It marked a slight dip in activity this quarter.
There were more than 1.2 million square feet of total gross leases and sales recorded this quarter, representing a drop in activity of 9%.
The submarket had an overall positive absorption of 354,439 square feet despite the decreased activity. That led to a decreased vacancy rate that now stands at 3%.
The average asking lease rate in the M&W sector moved up 1 cent to 48 cents per square foot, while the research and development segment increased by 2 cents to 71 cents per square foot.
Retail Properties
The vacancy rate remained constant at 6.3% for the 283 retail centers totaling 43.8 million square feet. But unstable economic conditions have led many retailers to close locations or hold off on expansion plans. Improved consumer confidence has led to recent increased retail sales.
There was negative net absorption of 15,930 square feet recorded this quarter, while no new centers are in the construction phase.
The average asking lease rate for retail space continues its downward trend, shedding 2 cents this quarter to $2.09 per square foot.
Analysis provided by CBRE Group Inc.
