Research and development space—with a base of 42.4 million total square feet—makes up about 17% of the total industrial market in Orange County.
The majority of the R&D sector (27.9 million square feet) is within the Greater Airport Area and South Orange County submarkets.
Both submarkets experienced solid gross activity for the third quarter.
But there was a stark difference between the two submarkets when comparing net absorption figures: South OC saw negative
327,358 square feet of net absorption for the quarter, while the airport area continued its trend from the second quarter of 2011 and recorded 87,801 square feet of positive absorption.
There was 264,526 square feet of negative total vacant square feet to more than 2 million.
This had a direct effect on the vacancy rate, raising the figure to 4.9%, up from 4.3% the previous quarter.
The vacancy increase was primarily centered in South OC, which saw a jump from 6.3% in the second quarter to 8.8%. The vacancy rate in the airport area dropped to 3.4% from 3.9%.
The average asking lease rate for the county was $0.85 per square foot, up from $0.82 in the second quarter. Rents remained flat in South and West County and increased slightly in the airport area, but the biggest change was seen in North Orange County.
Despite positive absorption and tight vacancy rates, average asking lease rates dropped $0.13 per square foot from $0.80 in the second quarter of 2011 to $0.67.
The R&D sector, though relatively healthy, is dependent on the long-term health of the South OC market. It’s unlikely to see the sustained growth in rents and tightening of vacancy rates until the industry begins to chip away at the more than 1.1 million square feet of vacant space.
Zanolli is an associate in the Newport Beach office of CB Richard Ellis. Data and analysis provided by CBRE Research.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
