The Orange County retail market continued to improve in the third quarter as demand increased.
Increases in consumer spending and confidence have helped push the economy toward a post-recession state, and that’s translated to the commercial real estate market, encouraging additional retail store locations and expansions.
Vacancy Rate
The vacancy rate for retail space in Orange County dropped 4% to 4.7%, the lowest rate in 2014 and 9.6% below a year earlier, when the rate was 5.2%. The decreased vacancy level was the result of continued demand and a reduced amount of vacant space coming onto the market.
The overall net absorption generated in the quarter remained positive, ending with 107,067 square feet. It was the fifth consecutive quarter of positive net absorption. Orange County hasn’t ended a quarter with negative absorption since the second quarter of 2013.
Lease rates experienced minimal change in the third quarter.
The Central Coast continued to have the highest asking lease rate of the five major submarkets, with an average of $2.56 per square foot. South and West OC posted the second- and third-highest lease rate averages, or $2.50 per square foot and $2.14 per square foot, respectively.
Central and North OC finished the quarter with average asking lease rates of $1.84 per square foot and $1.83 per square foot, respectively.
The Orange County retail market on the whole reported an average asking lease rate of $2.07 per square foot, consistent with the previous quarter.
CBRE Econometric Advisors forecasts average lease rates to increase 2.9% over the next 12 months.
North, South OC Projects
Construction continues on The Source in North Orange County. Its projected completion date has been moved back to this summer.
The first phase of construction on the Outlets at San Clemente broke ground during the quarter. It will consist of 325,000 square feet of retail, followed by the project’s second phase, which calls for an additional 230,000 square feet and is slated to begin in the fall.
Data and analysis provided by CBRE Research
