The West Orange County industrial market started off the year with a healthy run of activity that continues as confidence builds.
The vacancy level is down to 3.1% and the availability rate has decreased to 9.1% for industrial space.
The improving numbers stem in part from less available space coming onto the market, no new speculative construction and continued activity among companies leasing and buying space.
Class A buildings are in high demand for both sales and leases, and it appears that the market is near the bottom and beginning to stabilize on lease rates and sale prices.
Positive net absorption is expected to continue as trade flows and moves to rebuild inventory continue to recover through the rest of this year.
A recent report from Chapman University projected 23,000 new jobs in 2011 in the county, a reversal from a loss of about 10,800 last year. The Chapman Economic Research Report also indicated that California consumers slowly are gaining confidence in the economy and planning to spend more on big-ticket items this year.
That holds the potential to spur a rebound in the manufacturing sector.
The optimism cuts across three key manufacturing industry groups: high tech, durable goods and non-durable goods. Production and orders are expected to increase at a much faster rate this year compared to last year.
Increased consumer spending likely will lead to employment growth and restocking of inventories, helping a rebound for industrial space.
Increased domestic demand likely will combine with rising exports of computer products, medical devices, industrial goods and other products to Asia. One possible damper: rising energy and fuel costs, which could tighten the manufacturing sector.
Orange County should benefit from its proximity to the Ports of Long Beach and Los Angeles, a main driver of absorption in the industrial submarket. The ports have seen traffic increase by about 20% since the low mark of 2009. It is estimated that exports from OC jumped to 17.1% in 2010, with transportation equipment and computer and electronic products leading the way.
The market remains fluid, however, and the economy will remain the determining factor this year.
Goodmanson is a senior vice president in the Newport Beach office of CB Richard Ellis.
