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Orange County Industrial Market Report

2nd Quarter 2022

Posted In — Market Research | Market Report

MARKET DRIVERS

MAJOR USER ACTIVITY has never been higher in the Orange County industrial market, as competition for space continues to outperform available supply, driving rental rates to new all-time highs. The market’s direct asking lease rates have continued to rise, peaking at $1.48/SF at the conclusion of the quarter.

MANY LARGE NATIONAL INDUSTRIAL distributors intend to expand into Orange County. Due to a scarcity of suitable buildings and high lease rates, an appealing trend has emerged for a build-to-suit construction with a less expensive land acquisition to obtain a larger, new Class A property. As a result, tenant mobility has shifted, with a negative 525K SF absorbed in 2Q 2022.

DEVELOPERS are still looking for new projects in the sector, which currently has over 2.6M SF under construction. The highly anticipated Goodman Logistics Center, which will address rising infill demand with four cutting-edge logistic buildings totaling 1.5M SF, is set to open in the third quarter.

ECONOMIC OVERVIEW

ORANGE COUNTY’S unemployment rate was 2.4% in May 2022, down from a revised 2.7% in April 2022 and lower than the year-ago estimate of 6.2% During the same time period, California had an unadjusted unemployment rate of 3.4%, and the national rate was 3.4%.

THE PORT OF LONG BEACH transported 3,281,377 TEUs since April 2022, a -1.8% over the same time in 2021, due to their cargo delays at the ports.

NEAR-TERM OUTLOOK

THE NATIONAL INDUSTRIAL MARKET prognosis for 2022 remains highly optimistic, reflecting the convergence of numerous variables that have greatly enhanced demand for industrial real estate since the outbreak began and will continue to do so in the near future.

ORANGE COUNTY’S INDUSTRIAL MARKET has outpaced other property sectors, with increased lease volumes and rising rent increases approaching an all-time high of 12.3%. Orange County’s closeness to Los Angeles County ports and key thoroughfares into the Inland Empire, along with the county’s dense population, has bolstered stability in recent years. Despite record-high prices and a falling market cap rate, these strong local demand factors have kept investors engaged in Orange County. As inventory control has become a main emphasis for industrial users, several organizations have implemented a “plus one” facility model. As a result, expanded warehouse footprints have emerged as a new trend to handle greater inventory owing to recent and ongoing supply chain disruptions and as an added service to clients.

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