ANAHEIM, CA-The Orange County industrial market hit a record high for asking rental rates and a record low for vacancy in the fourth quarter, with asking rates surging 18% on a year-to-year basis, according to a year-end report from Voit Commercial Brokerage. Voit research chief and VP Jerry Holdner tells GlobeSt.com that the average asking rate climbed five cents in the quarter to reach 72 cents per sf per month, triple-net.

The county's industrial market has remained steady for years, but the Orange County office market has been making most of the headlines of late with strong absorption, record-setting lease rates and a big construction boom. The office market also remained strong in the fourth quarter, the Voit report shows, but the industrial market has quietly been turning in a performance that rivals that of its office counterpart.

Developers have converted some industrial buildings in Orange County into residential space, which might suggest that some of the tightening of the industrial market results from space being taken out of the total inventory. But the amount of space converted to residential uses "hasn't been enough to have an impact on the market," Holdner tells GlobeSt.com.

The industrial availability rate declined to 4.72% in the fourth quarter, about 6.23% lower on a year-to-year basis and "an all-time record low," according to Holdner. Although the amount of industrial space under construction surged by 59%, the actual amount under construction was only 1.2 million sf against a base of 221 million sf.

Based on the tight vacancy, strong demand and economic forecasts ofcontinued job growth in Orange County, Holdner expects industrial lease rates to grow by 5% to 7% this year. He forecasts a comparable increase for the office market, which set a new high for asking rates in the fourth quarter, rising nearly 11% to reach $2.52.

The office market has posted positive absorption for 12 consecutive quarters, Holdner notes, while vacancy has remained low despite the five million sf of new space under construction against a base of 100 million sf. More than half of the space currently under construction is either preleased or build-to-suit, he notes.

The office market has fluctuated slightly with the construction surge, with the direct vacancy rate inching up to 7.91% in the fourth quarter after declining to a record low of 7.39% in the fourth quarter last year. The availability rate rose to 11.5% in the fourth quarter, an increase that Holdner attributes to the large amount of space that mortgage companies and mortgage-related businesses returned to the market as sublease space in 2006.

Nonetheless, the county still posted absorption of 554,675 sf, which looks low in comparison to the nearly 3.7 million sf of absorption the year before. But as Holdner points out, the Orange County office market "was still able to grow" despite the contraction of the mortgage firms.