Industrial-market vacancy levels in Southern California are among the lowest of the 50 largest metropolitan areas, and the West Orange County submarket offered a prime example with a 2.9% vacancy rate at year’s end.
The low vacancy numbers offer evidence of the slowly improving market.
The data also point to a potential risk based on a lack of quality product.
The gross absorption for the entire OC industrial market was 3.3 million square feet in the fourth quarter of 2011, with net absorption at 1.07 million square feet. West OC contributed about 1.6 million square feet of the total activity, although it finished the year with some negative absorption.
The question will be if West OC and the county as a whole can maintain the recent pace of activity with very limited new product coming to market. There was no industrial product under construction at year’s end outside of a 26,000-square-foot build-to-suit in South OC.
There are two projects in the North OC pipeline, both by Western Realco—a 210,000-square-foot building in the Anaheim Stadium area and an 84,000-square-foot property in Brea. No construction is planned in West OC in the immediate future.
Across all ranges there is a lack of quality buildings to purchase, which has led to users expanding their searches into neighboring submarkets. There were moderate increases in lease and sale pricing during 2011, and substantial increases in rates is expected as more of the remaining quality buildings are absorbed in the first half of 2012.
The new construction in the North OC, Mid-Counties and South Bay submarkets will establish new value levels for both leases and sales. The economics will not quite match 2007 prerecession levels but should post a substantial jump from pricing seen throughout 2010 and 2011.
DeRevere is a senior vice president in the Orange office of CBRE Group Inc.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
