Retail sales continued to gradually improve in the second quarter, aiding the U.S. economy as local retail markets kept moving toward a full post-recession recovery.
That translated to the commercial real estate market as consumers propelled retail demand with increased spending, encouraging additional store locations and expansions.
Vacancy Rate
The overall vacancy rate for retail space in the Orange County market remained unchanged from the previous two quarters.
The consistency in vacancy levels is the result of continued demand for desirable properties and less vacant space coming onto the market.
The OC retail market saw little change in from the previous quarter, but the region’s overall vacancy rate remained at 4.9% compared to the 5.5% the previous year.
Absorption
The region had positive net absorption totaling 345 square feet. That brought the first half of the year total to 56,105 square feet of positive net absorption, with the largest areas of absorption being found in the South and Central OC submarkets. The positive net absorption generated in the quarter marked the fourth consecutive quarter of overall positive net absorption in the county.
The Central Coast submarket continued to have the highest asking lease rate of the five submarkets, ending the quarter with an average rate of $2.56 per square foot.
The Central and South Orange County submarkets saw increases, recording average rates of $1.84 per square foot and $2.50 per square foot, respectively. That represents a 7-cent increase for Central Orange County and a 3-cent increase for South OC over the first quarter.
The Orange County region’s lowest lease rate average was in North OC, which completed the quarter with an average rate of $1.83 per square foot. That represents a 5-cent decrease from the previous quarter.
Central Coast and West Orange County also recorded slight decreases, ending the quarter at $2.56 per square foot and $2.14 per square foot, respectively.
Multiple smaller construction projects are found throughout the region, but Orange County’s retail center development continued to be focused on the more than 400,000-square-foot center named The Source in Buena Park. Its projected completion will be just before the start of the holiday season.
Retail development is expected to remain minimal until more space becomes absorbed.
Analysis provided by CBRE Research
