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January 01, 2017

Kidder Mathews: Industrial vacancy rate at 2%

The Orange County Register

Vacancies in industrial property remain at historical lows in Orange County, according to a report by Kidder Mathews.

The vacancy rate ticked down from the record low rate of 2.4 percent to 2 percent during 2016, which equates to 4.8 million square feet of vacant industrial space countywide. This is down from the 5.97 million square feet that was vacant a year ago. Kidder foresees the vacancy rate remaining at this level for the near future.

"Moving into 2017, we anticipate further absorption gains and rising occupancy costs, and with very few deliveries in the pipeline to apply upward pressure on vacancy, we foresee 2017 being another year of growth," the report authors state.

Highlights from the report include:

  • Net absorption, a measure of market strength, was 956,313 square feet in the fourth quarter, giving Orange County over 1.6 million square feet of positive absorption for the year. For perspective, 2015 started with 307,663 square feet of negative absorption and ended the year with 2.6 million square feet of positive absorption.
  • The North County submarket added 781,366 square feet of occupied space in 2016, which accounted for the largest amount of positive absorption in the county.
  • Leasing activity was down due to the lack of available space. The 10.8 million square feet that came off the market in 2016 represented a decrease over the 13.7 million square feet that leased in 2015. With minimal new construction in the pipeline and with industrial product disappearing in Orange County to make way for residential and office developments, vacancies will remain low.
  • The average asking rental rate at the end of 2016 was 76 cents per square foot on a triple net basis per month. This asking rate is up 6 cents from the end of 2015, an 8.6 percent year-over-year increase.

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