Overall activity in the South Orange County commercial market picked up in the first quarter, recording positive net absorption of 176,679 square feet.
The largest gain was the industrial market’s 104,227 square feet of positive net absorption.
Office Market
The office market had net absorption of 68,560 square feet. The vacancy rate dropped 9.2% from the first quarter of 2013 to 9.5%. Office user demand remained strong, especially for small buildings for sale.
There was still high demand for office space in the Irvine Spectrum, with the high-rise office buildings at approximately 95% occupancy.
There was also a substantial increase in average sale prices throughout South Orange County, with those for small buildings up significantly year-over-year. Average asking rents increased 15% year-over-year, ending the quarter at $2.07 per square foot. Rents should continue their upward trend as available space remains tight.
Activity in the industrial market picked up, too, recording positive net absorption of 104,227 square feet compared to the negative net absorption in the fourth quarter. The research and development sector recorded 56,402 square feet, and the manufacturing and warehouse sector contributed the remaining 47,825 square feet. The South Orange County industrial market has become very active over the past 12 months, but there’s a supply constraint on quality buildings. Off-market deals have become a necessity for tenants to get into a good building.
The average asking lease rate in the manufacturing and warehouse sector increased 4.6% year-over-year, ending the quarter at 68 cents per square foot. The average asking lease rate in the research and development sector has been trending downward, dropping 1% year-over-year to 99 cents per square foot, a result of the lack of quality space on the market.
Retail
Overall market fundamentals for the retail market have stabilized. The first quarter recorded positive net absorption of 3,892 square feet. That’s a drop from the fourth quarter, but there’s still a healthy amount of demand for retail space in South Orange County.
The vacancy rate dropped 12.2% year-over-year, ending the quarter at 4.1%. The average asking lease rate has consequently started to rise, increasing 7 cents from the fourth quarter to $2.47 per square foot.
Research and analysis provided by CBRE Research
