VACANCIES CLIMB, RENTS FALL, TENANTS GAIN OPTIONS
2024 Q4 Industrial Report Orange County shows continued softening demand for industrial space drove up the vacancy rate in the last eight quarters from an all-time low of 1.8% to 5.5% as net absorption in 2024 fell to its lowest level in more than a decade. Additionally, overall rental rates continued to tick downward in 2024 while a record was set for available sublet space.
The weakness in tenant activity mirrors aspects of the national picture. Business owners paused expansions in 2023 largely due to lingering supply-chain issues and higher interest rates that reduced home sales and purchases of home improvement materials and appliances. Caution continued to hobble growth plans in 2024 pending the U.S. elections and their effect on tariffs. Leasing activity was down 5.3% for the year but Q4’s 2.8 million SF total was off 28% from 2023.
Net absorption in Orange County, whose inventory totals 278 million SF, was negative 1,191,254 SF in Q4 and off 5,269,917 SF for the year. Two of the county’s four submarkets – North County and Airport – combined for the largest annual contraction since the 2009 financial crisis. Only the 43.2-million-SF South County market reported absorption and rent gains for 2024.
Overall, asking rents averaged $1.58 per SF triple net, down 7.6% from a $1.71 per SF peak a year ago. Availability increased 55% year over year to 23.3 million SF. The volume of second-hand available space jumped 61% from a year ago to a record of nearly 4.5 million SF.
The largest tenant contraction was in the 117.4-million-SF North County submarket. Net absorption in 2024 was negative 3,985,588 SF, the most on record in that submarket of Anaheim, Brea, La Habra, Buena Park, Fullerton, La Palma, Placentia and Yorba Linda. The vacancy rate rose from a record low 1.2% at the end of 2022 to 6.2% and totals 7.3 million SF.
There were 1,287,231 SF added to the 73.2-million-SF Airport submarket in 2024 through a combination of tenants shedding space and the completion of three buildings totaling 808,977 SF.
The Port of Long Beach reported several monthly cargo records in 2024, and there was a 19% year-over-year jump in container traffic through the Port of Los Angeles. Many of the increases were due to contract issues with East and Gulf Coast longshoremen, causing buyers to arrange transit through West Coast ports where ILWU workers approved a six-year contract in 2023.
One of the largest leases of the quarter was third-party logistics provider Weber Distribution’s contract for a 137,000-SF, 46-year-old building with 26-foot clear height from the Irvine Company on Alton Parkway, Irvine, to serve a leading ramen noodle maker. Asking rent was $2.06 per SF.
MARKET FORECAST
2024 Q4 Industrial Report Orange County shows Orange County’s economy remains on a slowing yet still positive economic trajectory. Chapman University economist Jim Doti said in December that Orange County’s taxable sales will be flat in 2025 and the county population will fall by about 10,000 residents. He said residential sales will increase slightly in 2025 but prices will fall about 1%.