Activity in the South Orange County commercial market slowed in the third quarter, recording negative net absorption of 45,195 square feet.
The largest gain in absorption was in the retail sector, with approximately 82,000 square feet of positive net absorption. The industrial and office sectors, however, had negative net absorption of 80,340 square feet and 47,144, respectively.
Offices
The office market’s quarterly net absorption loss of roughly 47,000 square feet brought the year-to-date total to -37,000 square feet. The vacancy rate increased to 10%. It was 9.8% in the second quarter and 11.3% in 2012’s third quarter.
South Orange County office user demand, despite the slowdown in overall market fundamentals, remained strong, especially for small buildings for sale. There was still high demand for office space in the Irvine Spectrum, with its high-rise office buildings at about 95% occupancy.
There has also been 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 from the second quarter’s rate of $1.97 per square foot to $2 per square foot.
Industrial Properties
The industrial market in South Orange County is typically the strongest sector, but activity slowed in the third quarter.
The overall absorption in manufacturing and warehouse space was about -62,000 square feet, and in the research and development market, absorption was approximately -18,000 square feet.
The industrial sector also had a large increase in asking sale prices, which rose from $149.50 per square foot in the third quarter of 2012 to $177.94 per square foot in this year’s third quarter, an increase of 19% year-over-year.
The overall asking lease rate for industrial space in South Orange County is 85 cents per square foot, a 3.6% increase from the third quarter of 2012.
Retail
Overall market fundamentals for the South Orange County retail market stabilized. The third quarter had an increase in activity, generating 82,289 square feet of positive net absorption and bringing the year-to-date total to 71,331 square feet.
The vacancy rate dropped 13.4% year-over-year, ending the quarter at 4.5%. The overall asking lease rate decreased 3 cents per square foot from the previous quarter to stand at $2.49 per square foot.
Research and analysis provided by CBRE Research.
