Vacancy Decreased In Fourth Quarter
The Orange County industrial market closed the fourth quarter with net absorption recording 46,100 square feet. Much of this positive movement stemmed from the construction completion of the Jellco Container building adding 200,000 square feet. There is strong demand for new industrial buildings as developers are challenged with finding available development opportunities. Industrial product is expected to continue depleting as many properties are being sold as multifamily redevelopment land or creative office space conversion.
In the fourth quarter the total vacancy rate decreased 10 basis points from last quarter to 2.6%. Space remains scarce in Orange County, with the availability rate hovering at 4.1%. Vacancy is tightest for buildings ranging between 1-9,999 square feet at 1.4%, while buildings 100,000 square feet or greater have the highest vacancy rate at 4.3%.
- The vacancy rate decreased 10 basis points to 2.6% during the fourth quarter. Vacancy stood at 2.2% one year ago.
- Asking rental rates increased 14.5% from one year ago to $0.87 per square foot (PSF) triple-net (NNN).
- Industrial demand recorded 46,100 square feet of net absorption. Much of this positive demand was in the North County submarket.
- Construction activity fell during the fourth quarter totaling 963,100 square feet.
- Demand was positive for the quarter as market conditions remain tight and quality industrial space is scarce. Asking rental rates are expected to rise an additional 10%-15% by the end of 2018.
As demand remains positive and available space options are limited, rental rates will continue to increase. Investors will also continue to take advantage of acquisition opportunities heading into 2018. With 963,100 square feet of space under construction and strong industrial demand, vacancy rates are expected to remain at historic lows. Net absorption is expected to show positive movement in North County due to the future delivery of the Beckman Business Center Development in Fullerton. Asking rental rates are expected to trend upward by 10-15% by the end of 2018.
Development is a challenge in Orange County as many industrial properties and development sites are converted to residential and other commercial uses. With minimal federal interest rate increases
and investors looking for development opportunities, investment activity is expected to remain strong throughout 2018. While absorption records positive, the Orange County industrial market continues to move forward with positive momentum.