ORANGE COUNTY, CA-Continued warehouse vacancy improvement is anticipated in Orange County, according to Voit Real Estate Services. The firm says vacancies have pulled in by nearly 2 percentage points from the peak of the cycle and should continue to fall gradually as long as consumers keep spending, companies keep hiring and development remains muted.

With demand expected to keep pace over supply, vacancies should fall to very low structural rates by the end of the year, “simply due to lack of supply,” predicts Jerry Holdner, VP of market research for Voit. Because of this, significant lease growth is expected in the industrial realm in 2014, he says.

Much of the warehouse inventory in Orange County is of older stock and on the smaller side, according to Voit. Only eight existing properties are larger than 500,000 square feet, and demand has increased for these larger properties, says Holdner.

Historically, the subset of warehouses larger than 250,000 square feet has maintained a tighter vacancy rate than the overall market, and vacancies even approached 0% in early 2007. Since then, they have shot up rapidly and have exceeded the vacancy rate of the market's small-bay stock, reports Voit. However, given the return of port traffic and a turnaround in demand, these larger-bay facilities could find themselves in high demand in the near term.

Despite the seemingly good news, though, demand growth in Orange County for warehouse product continues to lag behind that of Los Angeles and the Inland Empire and will do so for the foreseeable future, according to Voit. Inventory is a shadow of that in nearby markets and buildings are generally smaller, so, in terms of demand totals, Orange County will pale in comparison to its larger neighbors. Still, while L.A. and the Inland Empire will pick up the lion's share of port traffic and impact from demographic trends, there should be enough left over to ensure at least moderate positive absorption over the forecast, although not much, according to the firm.

Meanwhile, small-bay boxes are a good bet in Orange County, and warehouses less than 100,000 square feet have recorded 1 million square feet of positive net absorption over the last year, while warehouses above 100,000 square feet have seen negative net absorption of 1.2 million. With the exception of buildings below 25,000 square feet, which took a major hit during the recession and only recently started recovering, demand for smaller stock has been fairly resilient here, Voit reports.

As GlobeSt.com reported exclusively last week, a partnership between Voit Development and Penwood Real Estate Investments has sold an industrial property at 1683 Sunflower Ave. in Costa Mesa to a private investor for $37 million. The deal is one of the largest industrial sales in Orange County so far this year.