RENTAL RATES SOAR WITH SUPPLY AT RECORD LOWS
Rental rates increased at levels without historical precedent and available space remained at an all-time low as healthy demand continued through the first half.
Countywide, average asking rents climbed 20.6% year over year with gains ranging from 14.5% to 24.2% across the county’s four major submarkets.
The average rent was $1.46 per SF triple net at the end of Q2. Rents were highest in the South County submarket, averaging $1.58 per SF, and lowest in West County, averaging $1.09 per SF, up 20% from a year ago.
By comparison, countywide rent growth averaged 7.5% annually over the previous five years.
Lee & Associates’ quarterly survey of properties 10,000 SF and up included 8,239 buildings totaling 273.4 million SF.
As for notable second-quarter transactions, the largest lease was for a 203,029 SF building at 701 S. Sally Place in Fullerton at $1.79 per SF that had been on the market for four months. Of the 20 largest new leases in Q2 the average time on market for the space was five months.
The largest sale was the $23-million purchase of a recently renovated 118,059-SF Stanton industrial park on 4.74 acres by an El Segundo investor.
Countywide vacancy at the end of the first half settled at 2.1%, a record and down 80 basis points from a year ago.
The vacancy rate was lowest, 1.3%, in North County, whose 115.1-million-SF inventory accounts for 42% of the county’s industrial base. Asking rents average $1.32 per SF, up 22.2% year over year. Although demand eased in the last year by about 1 million SF of negative net absorption, the supply was reduced by 1.8 million SF in nine buildings that were razed in three of the last four quarters. The North County submarket includes Anaheim, Brea, La Habra, Buena Park, Fullerton, La Palma, Placentia and Yorba Linda.
Demand for space in the 72.2-million SF Airport submarket has been trending higher with 1.6 million SF of positive net absorption since late 2019. Asking rents were $1.54, up an average of 24% year over year. At the end of Q2 the vacancy rate settled at 2.4%, a record low. Two more Airport-area buildings were razed in Q2, cutting the inventory by 206,180 SF.
Net absorption in the 45.6-million-SF West County submarket is up 367,827 SF through the first half. Average asking rent was up 20% in the first half and the vacancy rate settled at 2.7%.
Asking rents in the 42.7-million-SF South County submarket averaged $1.58 per SF at the end of Q2, for an average year-over-year gain of 14.5%.
The overall economic outlook improved in Q1 among local business In their Spring forecast, Cal State Fullerton economists said that central bankers’ tightening money policy will slow Orange County growth this year. “There are few signs of imbalance in any of the major sectors of the economy;” the economists said, adding that “labor remains strong, and personal incomes continue to improve.”