has been slumpingsince early last year,

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The vacancy rate in the county's 247-million-sf industrialmarket increased to 3.8% in the quarter from 3.1% in the secondquarter, and the availability rate rose to 7.5% from last quarter's6.8%, according to CBRE. Voit Commercial Brokerage cites similarfigures, reporting that the vacancy rate reached 4.38% in thequarter—compared with 3.82% a year ago—while the availability raterose to 7.86% versus 5.93% a year ago. While the vacancies aresubstantially lower than those in the office market, industrialvacancies typically run lower than office statistics.

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Voit pegs the negative net absorption in the county's industrialmarket at a far lower number than CBRE, only 26,101 sf, but the twocompanies' reports are difficult to compare in some respectsbecause they track different inventories and have different methodsfor accounting for space. Voit, for example, separates out R&Dspace from manufacturing/distribution space, which accounts forsome of the differences in the two firms' figures. In generalterms, however, both firms report Orange County industrial numbersthis year that represent a change of direction for a market thathas perennially been one of the strongest in the nation. CBRE notesthat, based on square footage, industrial leases in the thirdquarter were approximately 13% smaller on average than in the thirdquarter of 2007.

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CBRE points out that a significant number of transactions in thethird quarter involved tenants opting to renew existing leasesutilizing a "wait and see" approach, and Voit offers a similaranalysis, saying "The recent drop in activity is mostly a result ofhesitancy in the marketplace from the continuous stream of negativenews in a wide area of topics, most notably the credit crunch."

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Nonetheless, some significant deals did close in the quartrer.Eaton Aerospace signed a 140,630-sf lease in the Irvine Spectrum,the largest lease transaction of the quarter, and in South OrangeCounty an industrial user bought a 73,742-sf building at 2 Orion inAliso Viejo.

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CBRE says that overall, asking lease rates continued to holddespite a decline in the Airport Area, where lease rates for theM&W and R&D sectors slid four cents to 79 cents per sf permonth and $1.09, respectively. The county's M&W propertiesoverall asking rate on average was 68 cents per sf per month, whileR&D properties averaged $1.08 per sf. Voit calculates anaverage asking triple net lease rate of 76 cents per sf per monthin Q3, four cents lower than last quarter. The average askingselling price was $164.28 per sf, down from $166.36 in this year'ssecond quarter and $172 in Q3 last year.

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CBRE showed Orange County industrial construction continuesunchanged from the second quarter at 245,000 sf, with no newconstruction starts and some $500 million of projects expected tobe completed by year-end. Voit shows total space under constructionis 198,570 sf, "a fifth of the amount that was under construction ayear ago," according to the company's report.

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