Orange County's real estate developers are enjoying another banner year and can expect the robust growth to continue into 1987, according to forecasters at Coldwell Banker, the county's largest commercial real estate brokerage.
"The message is that all segments in this county are healthy," Robert A. Peterson, Coldwell Banker vice president, said at the company's midyear real estate outlook conference last week.
Coldwell analysts said they expect the county to experience record office construction and leasing through the remainder of 1986 but cautioned that it is still a renter's market because the pace of construction is outstripping immediate demand.
That closely echoes the company's predictions at the beginning of the year, as did projections last Tuesday that the frantic pace of retail construction threatens to produce a glut and that the demand for industrial buildings should finally catch up with supply during the second half of the year.
The office segment of the building industry is coming off its best-ever first half, and Coldwell's analysts expect a record 5.2 million square feet of office space to be completed this year, including 2.83 million scheduled to be finished during the second half of the year, according to Scott Perley, a Coldwell Banker vice president. That's 23% above the 1985 record of 4.1 million square feet.
Perley predicted that more than 3 million square feet of new office space will be leased this year, compared with 2.4 million square feet in 1985. But the vacancy rate, which has climbed to 20.1% from 19.3% since the end of last year, will continue increasing. Perley said that analysts expect supply and demand to mesh within a few years, but until then, he said, "it's still a tenant's market."
Likewise, a boost in industrial construction helped push the supply of available space to a record 19.5 million square feet during the first half of the year. Irvine Co.'s Spectrum technology park in east Irvine has added significantly to the availability of space designed for research- and development-oriented companies. Supply of warehousing and production facilities continues to be sparse by comparison--largely due to land prices.
Record Industrial Demand
The Coldwell Banker analysts also foresee a record demand this year for industrial space, according to Mark J. Mattingly, a Coldwell Banker assistant vice president. He predicted that 10.5 million square feet will be rented or sold by year's end, compared with 10.3 million square feet in 1985. Mattingly said the increase will come in the second half of the year--only 4.76 million square feet of space was rented or purchased during the first six months of the year. He said a stepped-up demand for research- and development-oriented facilities is largely responsible for the increase. A larger amount of space to be completed later this year already has been leased, he said.
Finally, the market for retail projects continues to be healthy. But Peterson said he is concerned that, if construction of shopping centers continues as proposed, the county soon could become overbuilt. He said that 16 retail centers now under construction should be completed by the end of the year while 21 centers are planned for 1987. In 1985, 11 centers were finished. "I'm very concerned that there's not enough small tenants to pick up all that space," Peterson said.