Industrial Market Sags Under Recession

The reports from the three firms vary somewhat because of the different sizes of inventory that they track and how certain space is accounted for, such as industrial versus R&D and flex tech, but they generally show the same trends. CBRE tracks nearly 250 million square feet of inventory, Voit about 221 million square feet and Colliers 212 million square feet.

CBRE shows the Orange County industrial vacancy rate at 4.7% and the availability at 10%, both up from the fourth quarter of 2008, while Voit puts the vacancy rate at more than 4.9% and the availability at nearly 10.4%, both up on a year-to-year basis. Colliers lists a 4.9% vacancy and an availability rate of 10.7%.

The weakening market is driving down rental rates, with the average asking triple net lease rate now at 65 cents per square foot per month, according to Voit, which forecasts that asking lease rates will "continue to remain soft for the short run, and concessions should continue to increase in the forms of free rent and increasing tenant improvement allowances to incentivize tenants to act now." Colliers describes a continued decrease in the average asking rent, but pegs it at 72 cents, while CBRE figures it at 68 cents.

Looking ahead and comparing the Orange County industrial market to the county's office market, Colliers notes that the county's industrial sector "is only dealing with a downturn in demand as opposed to both the downturn in demand and oversupply issues seen on the office side." It adds that, " While 2009 is shaping up to be a challenging year, at the very least,the Orange County industrial market currently looks no worse than nearby industrial markets such as Central Los Angeles and the South Bay."