The Orange County retail market continued its momentum in the third quarter, recording the largest amount of positive absorption the market has produced all year: 214,418 square feet.
That brought the year-to-date net absorption back in the black, with 168,209 square feet.
Power centers contributed the majority of the positive absorption, recording 175,114 square feet.
Neighborhood centers followed with 51,953 square feet. Community centers and strip centers ended the quarter with negative absorption, recording -222 and -19,881.
The vacancy rate, with the uptick in absorption, dropped more than 5% from the second quarter to stand at 5.5%.
The retail sector experienced an uptick in leasing activity overall but particularly in the quick-service restaurant category.
Tenants such as Pieology, Blaze Pizza, Spin Pizza, Capriotti’s Subs, Al’s Beef, Smash Burger and Firehouse Subs are actively looking for locations throughout the county.
Traditional names, such as Boudin, Corner Bakery, 85° Bakery, The Habit and Schlotzky’s, are also actively looking for local locations.
High-end, sit-down restaurants from outside the area are under construction at Fashion Island and South Coast Plaza. Lark Creek Restaurant is under construction at Fashion Island in the former Daily Grill space, and Fig and Olive is going to occupy the area once occupied by Coco’s restaurant.
Din Tai Fung comes to South Coast Plaza in the space that McDonald’s used to occupy. The 8,000-square-foot restaurant will seat 225 guests, and the focal point will be the dumpling exhibition kitchen, visible from both the shopping center and exterior entrances. Din Tai Fung started in Taiwan in 1958 and currently has three locations in the U.S.
Retail development remains sparse in general, though construction continues on a nearly 481,000-square-foot regional center in Buena Park. The regional center, named The Source, will include shopping, dining and entertainment and is due to be completed in October 2014.
The market, however, continues to benefit from the lack of development as tenant demand continues to absorb current availability. The county’s retail market has a long way to go before its market fundamentals reach prerecession levels, but the overall outlook remains positive as demand remains steady.
Data and analysis provided by CBRE Research.
