The Orange County retail market enters 2011 on the back of a strong holiday shopping season that topped off the fourth quarter of 2010.
The year-end strength first showed up on “Black Friday,” the weekend following Thanksgiving, which brought increases in the number of shoppers and total retail spending compared to a year earlier.
Black Friday also proved to be an indicator of a relatively strong holiday nationally, as promotions by retailers led to better-than-expected sales overall.
Yet the momentum from the strong holiday season didn’t erase a tentative outlook that’s become a habit among consumers in recent years. Consumer confidence fell slightly to 52.5 in December, according to the Conference Board index.
Uptick on Vacancies
Wavering consumer confidence continues to affect demand for retail space in the county. The overall vacancy rate ticked up in the fourth quarter, reaching 9.9% countywide. That was up from 8.3% for the same period a year earlier.
The increased vacancy rate and lower tenant demand led to 241,111 square feet of negative net absorption, bringing the year-to-date total to negative 468,127 square feet.
The bulk of the quarter’s negative absorption was seen in the Central County submarket, which accounted for 93,032 square feet.
South County and West County followed with 71,009 and 74,083 square feet of negative net absorption, respectively.
The Central Coast recorded 5,649 square feet of negative net absorption
North County saw a total of 2,662 square feet of positive net absorption, the lone gainer among local submarkets.
The West County submarket saw the most significant increase in vacancies in the fourth quarter, with a rate now above the local average at 11.6%.
Central County and South County both recorded increases in vacancy rates, to 9.8% and 10.5%.
The vacancy level in the Central Coast submarket rose minimally in the fourth quarter to 8.3% from 8.2%.
North County also was the lone area to see a decline in its vacancy rate, dropping slightly to 9.4%.
The average asking lease rate for the county fell one cent to $2.50 per square foot in the fourth quarter compared to the prior period. The decline was five cents compared to a year earlier.
Central Coast showed the widest range of lease rates, from a low $1.10 per square foot to a high $6 per square foot for specialty and strip centers.
Specialty Centers
Specialty centers throughout the county continue to command the highest average asking lease rate at an average of $3.61 per square foot, which is unchanged from the previous quarter.
No major new retail centers have opened here since the fourth quarter of 2008, and a number of projects that had been in preliminary planning stages have been put on hold.
Pacific City, a planned specialty center located in Huntington Beach, halted construction of the 191,000 square-foot center at the start of 2010. There is minor work ongoing at the center, but construction likely will not restart until the end of this year.
Analysis provided by CB Richard Ellis Research.
