Overall activity in the South Orange County commercial market slowed in the fourth quarter, recording negative net absorption of 82,264 square feet.
The office market had the largest gain in absorption, with approximately 41,153 square feet. The industrial sector had negative net absorption of 152,684 square feet.
The office market had net absorption of roughly 41,153 square feet, bringing its annual total to 4,080 square feet. The vacancy rate decreased 1% from the third quarter to 9.9%, the same as the 9.9% in the fourth quarter of 2012.
South Orange County office user demand remains strong, especially for small buildings for sale. There was still high demand for offices in the Irvine Spectrum, where the high-rise office buildings were at about 95% occupancy.
There was also a substantial increase in average sale prices throughout South Orange County, with prices for small buildings up significantly year-over-year. Average asking rents increased from the third quarter’s rate of $2 per square foot to $2.01 per square foot, a 4.1% increase year-over-year.
The industrial market is typically the strongest sector, but activity slowed in the fourth quarter. Overall absorption in manufacturing and warehouse space was negative 108,801 square feet, and in research and development space, it was approximately negative 44,000 square feet. The two sectors had an overall quarterly net absorption of negative 152,684 square feet.
Asking sale prices in the industrial sector rose from $151.69 per square foot in the fourth quarter of 2012 to $175.05 per square foot, a 15% increase year-over-year.
The overall vacancy rate dropped from the third quarter’s 4.4% to 3.8%. Year-over-year vacancy in the manufacturing and warehouse sector increased from 3.1% to 3.7%. The vacancy rate in the research and development sector declined 27% year-over-year to 5.5%.
The overall asking lease rate for industrial space in South Orange County was 84 cents per square foot, a 1.3% increase from the fourth quarter of 2012.
Overall market fundamentals for the South Orange County retail market stabilized. The fourth quarter had a healthy activity level. It generated 29,267 square feet of positive net absorption, bringing the annual total to 100,598 square feet.
The vacancy rate dropped 13.5% year-over-year, ending the quarter at 4.2%. The overall asking lease rate decreased 5 cents per square foot from the fourth quarter of 2012 to $2.40 per square foot.
The drop in average asking lease rates can be partially attributed to the lack of quality space left on the market. Retail activity and demand has picked up in Orange County overall, and the outlook continues to be positive.
Research and analysis provided by CBRE Research.
