The Orange County industrial market continued to perform well, building on the positive momentum experienced earlier in the year.
The market was tighter than ever, with no substantial amount of available space as demand continued to increase. Tenants executed leases and renewed deals quicker and sooner, bolstering healthy absorption figures.
The overall average asking lease rate at quarter-end was 70 cents per square foot, unchanged from the first quarter. Lack of significant rent growth over the past eight to 12 months can be attributed to low interest rates.
The manufacturing and warehouse and research and development sectors closed the quarter at 63 cents and 90 cents per square foot, the first unchanged, the second down 2 cents from the first quarter. Concessions have become unnecessary because landlords hold the leveraging power.
The industrial sales market continued to flourish, with the average asking sale price increasing to $167.58 per square foot, up from $160.41 in the first quarter. CBRE Econometric Advisors predicts that rents will trend up in the second half of the year due to short supply and high demand.
Vacancy remained at historic lows, even with construction taking place in Anaheim, Huntington Beach, Brea, and Fountain Valley, in large part because many of the new developments have been preleased or sold to a user. Vacancies should stay low due to growing competition with residential conversion and construction. CBRE EA predicts that availability will follow the same trend as vacancy through the second half of the year.
The county generated 3.2 million square feet of gross activity during the quarter, bringing the year-to-date total to 5.9 million square feet. The majority of the gross activity was class A space as absorption of space smaller than 100,000 square feet continued. Orange County recorded 1.2 million square feet of positive net absorption during the quarter, bringing the year-to-date total to 2.1 million square feet.
Food processing and freezer companies led the charge, making several building purchases and leases.
Restaurant Depot LLC leased 94,000 square feet in Huntington Beach. The apparel and technology industries continued to remain strong bedrocks in the region. Rolls Royce High Temperature Composites and Prompt Warehousing Co. signed new leases in Cypress and La Palma, respectively, totaling over 230,000 square feet.
Approximately 1.2 million square feet of space was under construction in the county at quarter-end, the majority—849,015 square feet—in North Orange County. Most of the buildings have been presold or preleased and will have very little impact on availability and vacancy rates.
Analysis provided by CBRE Research
