The Orange County high-rise office market continued to show signs of recovery during the first quarter with more than 300,000 square feet of positive net absorption.
It was the fourth consecutive quarterly gain and came amid what appears to be a growing sense among business owners that the economy is rebounding from the recent recession.
Local employment growth and expansions by some local companies have added to the optimistic outlook.
The recovery remains slow, and attractive terms and concessions by landlords also helped drive activity in the first quarter.
So did more declines in rents, with the average rate dropping 25 cents from a year ago to $2.12.
The rate of decline in rents slowed from the prior quarter, with a drop of just two cents. Most don’t expect any appreciable increases or decreases for the rest of the year.
Tenants continue to lock in lower “effective rents” with deals that call for lower rates upfront and annual increases in later years. Many landlords also continue to offer initial free rents, discounted parking and other concessions on the front-end of leases.
Such deals indicate that property owners believe a full recovery is on the horizon and want to ensure that leases will move in line with future rental rates.
New companies and expansion by others already here helped fuel the first-quarter gains.
Opus Bank recently took nearly 40,000 square feet of space in Irvine. The recapitalized bank is based in Redondo Beach but has its day-to-day management operations here.
Hyundai Capital, U.S. Bank, and Edwards Lifesciences also signed deals for expansion during the first quarter.
Schmitt is an associate in the Newport Beach office of CB Richard Ellis.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
