2016 Sets Low Vacancy Rate Record

Orange County industrial market conditions remain at historically healthy levels. Although there is a strong demand for new industrial buildings, developers are challenged with finding available infill sites.

Industrial product is expected to continue to deplete due to many properties being sold as land for multi-family redevelopment or converted to creative office space. The industrial market has evolved to handle niche technology hub industries and specialty retail. The market is focused on smaller value-add manufacturing buildings that have a large R&D component. As such, rents for industrial space tend to be higher in Orange County compared to neighboring markets.

Key Takeaways:

  • The vacancy rate hit an all-time low of 1.9% this quarter as quality industrial space is increasingly hard to find in the Orange County industrial marketplace.

  • Average asking rents held steady at $0.76 PSF NNN. Rents are up 10.1% over the year.

  • Industrial demand was positive with 805,200 square feet (SF) of net absorption recorded.

  • There was 260,300 SF of construction completions this quarter and there remains 69,500 SF under construction.

  • As market conditions remain tight and quality industrial space remains scarce, asking rental rates are expected to rise by another 5% to 10% by the end of 2017.

Outlook:

Orange County industrial market conditions remain at historically healthy levels. Although there is a strong demand for new industrial buildings, developers are challenged with finding available infill sites. Industrial product is expected to continue to deplete due to many properties being sold as land for multi-family redevelopment or converted to creative office space. The industrial market has evolved to handle niche technology hub industries and specialty retail. The market is focused on smaller value-add manufacturing buildings that have a large R&D component. As such, rents for industrial space tend to be higher in Orange County compared to neighboring markets.