ORANGE COUNTY, CA—Despite flat industrial absorption during second-quarter 2014, industrial rental rates rose considerably during Q2 and should continue to do so, according to industry experts. Cushman & Wakefield Inc. reports that direct net rental rates increased to $8.87 per square foot during the quarter for annual growth of 4.2%, and Voit Real Estate Services also reports rental growth.

“We believe that rents are going to continue to rise,” Jerry Holdner, VP of market research for Voit, tells GlobeSt.com. “Over the past 12 months, we've seen asking rates rise by over 5%, and many of today's deals are getting completed at closer to the asking rate than they were a few years ago with fewer concessions. Going forward, we are anticipating annual lease rate growth in the 5% to 7% range through 2017, with assets below 100,000 square feet seeing particularly robust growth due to the lack of availability. Construction of industrial buildings in Orange County is relatively low at the moment, and with very few available sites, this will add upward pressure on lease rates in the foreseeable future.”

C&W reports the overall vacancy rate for Orange County industrial during Q2 was unchanged at 3.9%, representing a decline of 50 bps from a year ago, and that the market has absorbed 4.5 million square feet of space since the start of 2011. Holdner says his firm's research shows 3.5 million square feet of absorption since the third quarter of 2012.

C&W also reports the lack of supply of available space for lease contributed to a slowdown in leasing volume and year-to-date leasing activity decreased by 25.9% from last year to 5.3 million square feet.

Although tenant movement declined during the second quarter, the investment market was strong, according to C&W. Due to low vacancy and rising rental rates, investors have been attracted to both core assets and value-add properties, the firm says. As GlobeSt.com reported in August, CapRock Partners LLC has acquired a high-image mixed-use industrial property at 14191 Myford Rd. in Tustin, CA, from a seller GlobeSt.com learned is a joint venture between Penwood Real Estate Investments and Western Realco for a price not revealed to us. Located within the Jamboree/I-5 freeway and 261 toll-road corridor, the property comprises 7.4 acres with a 110,000-square-foot industrial/R&D building that includes 10,000 square feet of second-floor office space.