MARKET DRIVERS
In the third quarter of 2024, the Orange County industrial market shows continued activity, driven by significant demand from sectors like high-tech, automotive, energy, and bio-manufacturing. The region has witnessed a significant rise in sophisticated and efficient manufacturing, surpassing distribution and warehousing.
Orange County’s direct vacancy rate reached 4.1% by the end of the first half of 2024, which is well below the 6.6% national average for the primary industrial markets in the country. If there’s no discernible increase in leasing activity, there will be more available spaces on the market. Approximately 20% of the total space available in the market consists of sublease and under-construction areas.
ECONOMIC REVIEW
An effective manufacturing sector is crucial to the nation’s future economic growth. Government agencies have recognized that modern manufacturing is key to strengthening our economy. Government initiatives, including substantial subsidies, are expected to boost business and economic growth.
However, challenges remain, particularly regarding regulations and workforce development.
The rise in warehouse projects may be attributed to several factors, such as increased demand for industrial space, expectations for leasing rates, and overall economic conditions. Manufacturers for big retailers, like Amazon in Irvine, may notice this shift as they recently announced plans to close smaller fulfillment facilities while boosting same-day delivery because of growing real estate expenses and general land constraints.
NEAR-TERM OUTLOOK
The region has seen a steady increase in the need for industrial space because of a combination of factors, including ongoing changes in the supply chain and the ongoing expansion of e-commerce, which has raised the demand for distribution and warehouse space. Despite a slight rise in vacancy rates, the market is still rather competitive, in part because there is a shortage of available space and a limited amount of new construction projects. The competition among tenants for effective spaces has led to a slight increase in rental rates.
The Orange County industrial market is expected to remain competitive in future quarters because of its advantageous position regarding surrounding counties and the ports needed for product delivery. Although the rate of development may slow down briefly, the market’s durability is expected to be maintained by the underlying demand of all sectors. Overall, the Orange County industrial market trend is expected to be toward facility modernization to accommodate changing operational and logistical requirements.
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