OC Industrial Leasing Slows Amid Supply Shortage

Orange County industrial leasing activity has seen a slow down in velocity, especially for larger boxes above 100,000 square feet, thanks to the extreme lack of space. It has become a common problem in a market that is seeing record demand and a vacancy below 3%. Ecommerce drove the market activity with nearly 140,000 square feet of net absorption for the year, according to a recent report from JLL. However, all-in, the market was down 66,369 square feet in net absorption.

“In general, ecommerce has been driving demand on an occupancy basis,” Zach Niles, managing director at JLL, tells GlobeSt.com. “Overall, leasing velocity is down because vacancy is so low and there is nothing to absorb for class-A assets,” Zach . When we look back at 2018 and all of the leasing transactions over 100,000 square feet for class-A space, there are only six total transactions. The take away is that there is not a lack of demand but rather a true lack of supply.”

For these users, class-A industrial space is in the highest demand, but Niles says that many have moved into class-B or more dated spaces as a result of the lack of supply. “Fulfillment or partial delivery can get away with class-A buildings because goods go in and out so quickly. It isn’t critical that it is class-A, but typically it is preferred,” he explains.