market report
Showing posts with label market report. Show all posts
Showing posts with label market report. Show all posts

Lee & Associates 2nd Quarter Industrial Market Update


Values Recover But Market Loses Steam

Orange County’s red-hot industrial market suddenly has taken a breather.After reaching and exceeding historic pre-recession levels, rental rates for Orange County industrial space were flat in the second quarter. Leasing activity is off, averaging 13% fewer deals this year than in 2015 and 21% less than over the last five years. Absorption gained in the second quarter but remains negative for the year.

 More evidence of a pause in the market is showing up in building prices. After recently topping all-time highs, asking prices have leveled off in all size ranges. Buildings are taking longer to sell, and some prices have been cut – a dramatic change from the intense demand and multiple offers driving values steadily upward since 2012. The lull comes amid uncertainty over the strength of the economy and unpredictability of voter sentiment as the general election nears. The cost of high-quality debt has been rising, and values of big bank shares have plunged. Results of the Brexit referendum in June, in which England voted to leave the EU, sent a shockwave through financial markets and made a once-unlikely outcome on Nov. 8th appear more possible.

 None of this apprehension makes site selection any easier for businesses planning for growth. Orange County’s industrial vacancy rate has remained at less than 3% for the last four quarters and is among the tightest in the U.S. Average asking rents are up 9%
year over year and users are frustrated by the short supply. Nevertheless, landlords and users can expect that only buildings in Class A condition will command top dollar in the current market.

 Despite the countywide respite, North County posted a healthy second quarter. With 116.8 million sq. ft., the vacancy rate in the county’s largest submarket slipped 10 basis points to 2.2% on net absorption of 302,100 sq. ft. The year-over-year jump in asking rents averaged nearly 15% but slowed to 3% in Q2.

 The small West County submarket with 44.7 million sq. ft. also posted 90 days of strong activity in which 281,808 sq. ft. was absorbed, but it brought the total gained in the last four quarters to 91,492 sq. ft. Asking rents were unchanged in Q2 but are up 9% year over
year.

 In the Airport submarket’s 74,720,879 sq. ft., the vacancy rate gained 10 basis points, settling at 3.3% due to negative absorption of 169,964 sq. ft. Average asking rents were up 1.25% in Q2 and 8% year over year.

 South County landlords have put 135,508 sq. ft. into the vacancy column since January, a reversal of the average 128,431-sq.-ft. quarterly absorption gains in the previous 16 quarters. With 41,939,615 sq. ft. in total inventory, South County’s Q2 vacancy rate was unchanged at 3.2%.
To Download Full Brochure Click Here
Read More

Lee & Associates 2nd Quarter Office Market Update



Q2 Absorption Gain; Companies Flock to South County 

After a sluggish start early this year, demand for Orange County office space surged in the second quarter, posting the biggest gain in six quarters. Lease rates continued to climb in the largest submarkets, keeping the countywide average on pace next year to equal its all-time high.

 Demand intensified in the South County submarket, which is anticipating completion next year of nearly 1.8 million sq. ft. of Class A high-rise and campus-style buildings. Countywide, 11 buildings totaling 2.4 million sq. ft. are under construction and ground-up development costs are reaching $600 per square foot. Ignoring low capitalization rates, however, investors are piling into well-located office assets, favoring Class B low-rise campus-style buildings they believe will command upwards of 25% more in rents when updated as modern “creative” space.

 Eight of the new buildings underway are in the South County submarket, which checked in with 338,364 sq. ft. of positive absorption in the second quarter, driving the vacancy rate down to 9%. It was the third consecutive quarterly gain totaling 713,176 sq. ft. in South County, which totals 23.3 million sq. ft. and includes Irvine Spectrum. The Irvine Company is under construction on six mid-rise buildings totaling 528,000 sq. ft and a 21-story highrise. The Airport submarket, the county’s largest with 42.5 million sq. ft., has seen companies shed nearly 200,000 sq. ft. in the last three quarters. Its vacancy rate was unchanged at 10.8% in Q2, and asking rents gained 10.4% year-over-year. The availability rate jumped to 17% due, in large part, to the planned move by Broadcom out of Irvine’s University Research Park, which put about 900,000 sq. ft. on the market. The submarket includes Newport Beach, Costa Mesa, Fountain Valley and south Santa Ana.

 With 14.1 million sq. ft. in total inventory, the North County submarket rebounded in Q2 with 26,606 sq. ft. coming off the market, dropping its vacancy rate to 10.5%. Year-over-year net absorption in North County totaled 276,231 sq. ft. but the submarket, which includes Fullerton, Buena Park, Yorba Linda and Placentia, has yet to post more than two straight quarters of positive absorption since the recession.

 Absorption in West County settled on the plus side in Q2, but over the last six quarters is 172,319 sq. ft. in the red. Average rents virtually are unchanged from a year ago. Despite about 95,000 sq. ft. of negative absorption in Cypress, the vacancy rate in the small 8.9 million sq. ft. submarket that includes Los Alamitos and Huntington Beach
was unchanged at 10%.

 The 14.4% vacancy rate in the 22.4 million sq. ft. Central County submarket is greatly influenced by the 18% vacancy in Santa Ana’s 14.3 million sq. ft. Other cities in the submarket include Orange, where 7% of its 6.6 million sq. ft. are empty, and Anaheim with 7.4 million sq. ft. at 13.1% vacancy.
To Download Full Market Update Click Here
Read More
Subscribe to: Posts (Atom)