Retail sales continue to experience the ups and downs of macroeconomic conditions, and the commercial retail market is mirroring those trends.
The overall retail vacancy rate in Orange County ticked upward to 5.9% in the second quarter, as lessened demand led to 46,136 square feet of negative net absorption.
The majority of this absorption was concentrated in North OC, particularly in its power and strip centers.
The market, despite the dip in activity this quarter, did see a slight rise in asking lease rates that placed the average rent for the county at $2.33 per square foot.
Construction of new retail space in Orange County is minimal. Some development is starting to take place in centers of less than 50,000 square feet, but new construction of larger centers depends on leasing precommits and will likely not begin until a steady trend of positive momentum can be achieved.
The county’s overall vacancy rate for retail space was 5.9% in the second quarter, up from 5.8% in the first quarter.
The South OC submarket carries a vacancy rate of 4.9%, representing the lowest vacancy rate in the region. Vacancy levels in North OC and the Central Coast were 5.5% and 5.6%, respectively. The West OC submarket now holds a vacancy rate of 6%, while Central Orange County marked the highest level in the county at 6.9%.
Community centers tracked the highest vacancy level at 6.4%, while neighborhood centers had the lowest vacancy rate of 5.5%.
Absorption, Lease Rates
Recent tenant activity declined in the second quarter, resulting in 46,136 square feet of negative net absorption.
The bulk of the quarter’s negative absorption was seen in North OC, which recorded 68,214 square feet of negative net absorption.
Central OC recorded the greatest amount of positive absorption this quarter with 31,896 square feet.
This absorption was mainly attributed to the lease of 20,000 square feet to Chuze Fitness at Cypress Plaza. The Central Coast and South OC also had positive absorption, posting a combined total of 28,717 square feet, while West Orange County accounted for 38,535 square feet of negative movement.
The average asking lease rate rose by 1 cent to $2.33 per square foot.
West OC is tracking the widest range of lease rates, from a low of $1 per square foot to a high of $6.50 per square foot, resulting in an unchanged average asking rent of $2.18 per square foot. OC specialty centers—which were once near the $4 mark—continue to command the highest average asking lease rate at $3.48 per square foot, which is up from $3.45 recorded last quarter.
Construction of new retail centers in Orange County remains on hold. The market has had no new construction start since 2008. Pacific City, which is a specialty center located in Huntington Beach, halted construction of the 191,000-square-foot center in early 2010.
Analysis and data provided by CBRE Group Inc.
