OC Retail Continues to Improve

IRVINE, CA-With vacant space decreasing from fourth-quarter 2012 and nearly 70,000 square feet of positive net absorption for the first quarter, the Orange County retail market is displaying positive indicators, according to a market report from Voit Real Estate Services. Average asking triple-net lease rates appear to be stabilizing, but stability and job growth will need to continue in the coming quarters to sustain a recovery.

“We are beginning to see a decrease in the amount of vacant and available space being added per quarter,” say Jerry Holdner, Jr., VP of market research, and Tony Tran, market research analyst, in the Voit report. “We are also seeing an increase in both lease and sales activity. Lease rates appear to have hit bottom and are expected to continue to firm and increase going into 2013. As job creation continues and consumer confidence stabilizes, the retail market will continue to recover.”

There's talk of more repositioning and expansion of some existing centers in the county, even with nearly 250,000 square feet of retail space under construction in Orange County. The slowdown in construction has eased and will continue to ease the upward pressure on vacancy rates and the downward pressure on lease rates as demand for quality retail space catches up to supply, according to the report.

Unoccupied direct/sublease space finished the first quarter of 2013 at 5.5%, a decrease from the previous quarter and more than 6% lower than the same quarter of 2012, the report states. General retail space had the lowest vacancy rate at only 3.7%, while shopping centers had the highest at 6.8%.

Meanwhile, Terranomics Retail Services reports that national retail sales fell in March by their biggest decline in nine months, but the drop may be due more to the weather than any other factor. Total retail sales fell 0.4%, while core retail sales fell by just 0.2%. As the weather warms up and gas prices continue to fall, the retail sector as a whole is expected to improve over the next quarter, although slowly.

As GlobeSt.com reported earlier this week, a 139,314-square-foot neighborhood retail center has been sold in Los Angeles County for $48 million in an all-cash transaction. Diamond Hills Plaza was sold by Sarofim Realty Advisors to Retail Opportunity Investments Corp. The plaza, located at 2711 South Diamond Bar Blvd., is 99.4% leased and includes the 45,000-square-foot Super H-Mart, an Asian-focused supermarket chain with over 40 locations in North America.

Check back later today for an update on the Orange County retail market, including insight from Voit's Jerry Holdner on rent growth for the rest of 2013 and 2014.