When comparing the modestly improving market of September with the dark days of late 2009, there is a noticeable upturn in confidence in the West Orange County industrial market.
The market for manufacturing and warehouse space actually is tight with stable rents and lower vacancies. In the second quarter, average asking rents were 53 cents per square foot, down 3.6% from a year earlier. Vacancy has gone from 4.7% a year ago to 3.3%.
The area recently saw one of the county’s biggest industrial leases of the year. Modular Wind Energy Inc., which makes blades for wind turbines, leased a 167,778-square-foot industrial building in Huntington Beach.
The five-year lease is valued at about $5 million. Modular Wind moved from Long Beach.
Other parts of the West County market are mixed, with signs of improvement in retail and research and development space but a continued slump in office space.
Overall, the market continues to see negative net absorption, falling rents and increasing vacancies.
In the second quarter, the manufacturing and warehouse segment alone offset negative net absorption in office and retail space to help the market post a 3,915 square foot gain.
For the year through June, the market saw 170,502 square feet of net absorption, driven largely by manufacturing and warehouse space.
At the same time, the pace of decline in asking sale prices and lease rates is slowing, reflecting a tightening market. But we still are not seeing appreciation in the price of real estate.
The availability rate, including subleases and longer-term vacancies, still is in double-digit territory.
But sublease space slowly is being addressed, and some longer-term vacancy potential may turn into lease extensions at today’s lower prices.
The limited supply of buildings for sale also is showing improvement with some class A buildings receiving multiple offers.
Much of the buyer interest is driven by low prices, which shows that local users are willing to invest in real estate as well as their businesses.
DeRevere is a senior vice president in the Anaheim office of CB Richard Ellis Group Inc.
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Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
