Our commentary and downloadable reports on the Mid Counties and Orange County industrial markets.
Orange County Industrial Market Faced Even Stronger Headwinds in Q3
Market activity continued to slide in Q3. Vacancy was up by 56 basis points and the rate of rise accelerated. Transaction count and total transactions also fell sharply. Net absorption remained in negative territory and buildings are sitting on the market longer.
Despite those negative trends, the average asking lease rate countywide managed to move up by 5 cents during the period, as the supply of quality buildings for lease remained thin. Also, demand from owner/users to buy is shifting back to leasing because of the ongoing spike in mortgage rates. The SBA 504 mortgage rate ended the period at 7.61%, up from just 5.88% five months ago. Sales prices are finally beginning to come down, but the significant price correction we have been expecting still has not arrived. Supply remained very tight throughout the quarter, and even though buyer demand has declined, there is still enough of it to absorb anything that comes on the market for sale.
Our biggest concern is the potential for a sudden flood of supply that could hit the market all at once as long time owners sitting on big gains decide to cash out while prices are still near the peak. Once supply outstrips the current level of demand, the correction would begin in earnest. Add even higher interest rates than we have today, and we could be in for a bumpy ride heading into next year.