Industrial assets in Orange County, Calif. remain the favorite product type for investors in 2019, as cap rates continue to provide returns on investment. Orange County fundamentals remain resilient through market uncertainty and will continue to post record-breaking sales prices and asking rents, reported Cushman & Wakefield.
The market continues to struggle, however, with a lack of available quality product to keep up with record demand, which is hindering further rent growth.
Year-to-date leasing activity reached 6.7 million square feet in the third quarter, an increase of 1.2 percent from the same period a year ago. Renewals, which are not included in leasing statistics, continue to dominate the big-box activity due to the lack of available options.
Over the past 12 months, Orange County has completed nearly 1.5 million square feet of new warehouse inventory as developers race to build, given the rising rents and low vacancy.
Orange County ended the third quarter with an overall vacancy rate of 2.2 percent, a decrease of 10 basis points from the previous quarter. Ending the third quarter with an average asking rate of $0.87 per square feet per month, warehouse product has seen steady increases in rental rates during the past five years, with an average annual increase of 7.6 percent.
Investment activity had a record-breaking quarter, with nearly 3.5 million square feet of industrial space sold to investors from July to September. This brings the year-to-date total to 6 million square feet, an increase of 56.4 percent from the same period last year. The largest sale transaction so far this year occurred in the third quarter, with the Albertson’s sale/leaseback of their 1.2-milion-square-foot distribution facility in Irvine Spectrum at 9300 Toledo Way.