The submarket of West Orange County experienced a second consecutive quarter of overall negative net absorption in the third quarter of 2011.
But trends varied within each sector—retail, office and industrial. A breakdown by sector shows the difference in trends on stability, rates and expectations.
The retail market continues to experience the pressures of inconsistent retail sales and below-average consumer confidence. The retail market in Orange County continues its trend of consecutive quarters of increasing vacancy rates, which began in the second quarter of 2008.
New vacancies have been created recently due to major chain closures such as Borders, Lowe’s and JCPenney. In West Orange County the retail market had a 5.4% vacancy with 18,196 square feet of negative net absorption during the third quarter of 2011, and this has put downward pressure on lease rates. The average asking rate is now at $2.35 per square foot, down 2.5% from $2.41 per square foot last quarter and down 5.6% from $2.49 one year ago.
The OC office market is showing more signs of recovery and stability than the retail market. At a vacancy rate of 15.7% in Orange County, the office market continues its streak of declining vacancy, with six consecutive quarters of decline beginning in the second quarter of 2010.
In West Orange County the office market was the only commercial market to have positive net absorption last quarter, with a total of 6,023 square feet.
The positive absorption and declining vacancy have helped stabilize the office market in West Orange County, keeping asking lease rates unchanged from the previous quarter at $1.88 per square foot.
The countywide industrial market had a strong third quarter with 541,781 square feet of positive net absorption. The increase in demand for industrial property pushed vacancy rates down to under 4%, and average asking lease rates increased for the first time since 2007, now at $0.60 per square foot.
The West OC industrial submarket 89,999 square feet of negative net absorption and operates at a vacancy rate of 3.2%.
Manufacturing and warehousing contributed 60,155 square feet to negative net absorption in this submarket in the third quarter of 2011. The research and development industrial product was responsible for 29,844 square feet of negative net absorption.
Caplan is a sales assistant in the Orange office of CBRE.
