R&D Market Stabilizes in Q1

NEWPORT BEACH, CA-The Orange County research and development sector showed clearer signs of stabilization in the first quarter, according to a report by Voit Real Estate Services. Both vacancy and availability decreased compared to the prior quarter's rate and 2012's first-quarter rate, and the market posted more than 230,000 square feet of positive net absorption for the start of 2013. The absorption rate of 232,449 square feet gives the R&D market a total of just over 900,000 square feet of positive absorption for the last nine quarters.

“We are seeing a decrease in the amount of available space in the Orange County R&D market,” say Jerry Holdner, VP of market research, and Tony Tran, market research analyst for Voit. “As we continue into 2013, absorption has been positive, and with very few new deliveries in the pipeline to apply upward pressure on vacancy, the market should continue to stabilize.”

The researchers say they expect an increase in investment activity in the coming quarters, with lease rates firming up and continued increases anticipated for the rest of the year. “Concessions in the forms of free rent, relocation funds and tenant improvement allowances have begun to lessen. We should also see an increase in leasing activity as many short-term deals come up for renewal and as job creation continues in 2013. As unemployment rates drop and consumer confidence stabilizes, the R&D market will recover.”

As GlobeSt.com reported in January, Holdner predicted that job growth in the professional and business services arenas will fuel job creation this year. At that time, he reported that vacancy was around 13.75% and should drop to around 13% by the end of the year. He also predicted that office lease rates will rise by 2% this year.