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ORANGE COUNTY-Held back previously by a for-sale market that siphoned off much of the demand, and helped by rising prices of for-sale space, industrial lease rates have finally taken off in Orange County and have leaped to a new record. Jerry Holdner, VP and chief of research at Voit Commercial Brokerage, tells GlobeSt.com that the new high of 67 cents per sf per month represents a leap of six cents per sf from the average asking rate in the first quarter.

The six-cent jump in the average asking triple-net asking rate represents the largest increase since Voit Commercial began tracking the rate in the 1980s. In most quarters, an increase of even a penny is considered a sign of a strong market because industrial rates tend to rise much more slowly than office rates. Holdner tells GlobeSt.com that the previous record rate was 62 cents per sf in the first quarter of 2001.

Holdner cites a number of factors that contributed to the quarterly leap: Leasing is gaining popularity with users of industrial space because sales prices are increasing and demand for space is outpacing supply in part because a substantial amount of older industrial space is being taken off the market for conversion to other uses. New space coming onto the market is leasing and selling at higher rates, including projects like new buildings being marketed by Voit at 1600 Kraemer and 1650 Kraemer Ave. in Anaheim.

In addition to record-breaking lease rates, Orange County’s vacancy rate is continuing to decrease, putting additional pressure on lease rates to continue to rise in 2006. The industrial vacancy rate stands at 3.8%, which is 12.24% lower than it was a year ago, while the total amount of available industrial space dipped by 20% during the same time to reach its current level of 4.93%. The availability rate is a record low.

Activity in the industrial sector in Orange County was down due to the lack of available product, with only 3.3 million sf of activity in the second quarter, down from 4.4 million sf in the second quarter of 2005. Construction, trying to keep up with demand, soared to 1.9 million sf, 135% higher than it was in the second quarter last year.

The industrial market absorbed more than one million sf of space in the quarter, and average sales prices continued to climb to a record $140.76 per sf. The average sales price represents an increase of 16.66% on a year-to-year basis and has climbed steadily ever since the first quarter of 2001, when it was $82 per sf.

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