COMMERCIAL
Tenants looking for better digs at cheaper prices drove the deals in the second quarter—one of the most active quarters the local office market’s seen in a few years, according to tenant brokerage Studley Inc.
Those deals pushed down the county’s overall availability rate to 22.4% in the second quarter, down about half a percent from the first quarter and reversing a long period of increases, according to a recent report from the brokerage.
For the best office space in the county, the decline was a little more pronounced.
Class A space ended the second quarter with a 28.8% availability rate.
That’s still high, but it’s a 0.7% drop from the prior quarter and the end of an “ugly” 17-month stretch of increases, according to the Studley report.
Leasing activity also picked up steam in the second quarter, with 2.5 million square feet of leases signed, according to the brokerage.
That’s more than 45% higher than the county’s long-term historical average.
“A flight to quality appears to be gaining momentum as companies that survived the worst of the recession have gained enough confidence to move forward with relocations and are eager to take advantage of the strongest opportunities for savings in decades,” the report said.
Monthly asking rents average about $2.04 per square foot per month—more than 10% less than what they were a year ago—while class A space asking rents now stand at about $2.13 per square foot, 9.5% less than year-ago levels.
Among other recent positive signs, the Orange County office market ended the first half of the year with 2.8 million square feet of available sublease space, a 10.4% drop from the first quarter and a 20% decline from a year earlier.
More than half of the available sublet space is higher-end space, according to the report.
There still are plenty of problem buildings in OC, as there’s “a mountain of space to absorb,” according to Studley. The county has 395 buildings with an availability rate of more than 25% and 66 buildings that are completely empty.
Even with positive absorption rates in the 1-million-square-foot range per year, it could take nearly 10 years for the area’s vacancy rate to fall to 10%—which would be considered healthy—the tenant brokerage noted.
Steadfast Starts
Irvine-based Steadfast Cos. has kicked off an initial public offering for a real estate investment trust that’s looking to buy apartments and other commercial properties.
The Steadfast Income REIT Inc. became effective last month; it’s looking to raise as much as $1.65 billion in total, but will start looking to buy properties once it raises more than $2 million.
The trust has been in the works with the Securities and Exchange Commission since July 2009.
Apartments should make up as much as 75% of the investment vehicle’s portfolio, with industrial properties also being targeted.
RESIDENTIAL
Officials at Newport Beach-based Newman Garrison + Partners have announced the architecture firm’s first local project using it’s “New Block” design, which puts smaller housing in urban settings to maximize space.
It also uses different construction materials to cut costs.
Buena Park’s City Council recently approved the development of the project, a 70-unit apartment complex at 8850 La Palma Ave.
The site once was a Sears but has been vacant the past few years.
The city bought the 2-acre site last year for $3.5 million.
Newman Garrison has been meeting with city staff and builders during the past year to pitch its urban infill project; the firm thinks New Block is a good example of a project that can get done in a down economy.
The design features three- and four-story apartment and condominium buildings.
The units are set to average about 875 square feet each, which will fit as many as 45 units per acre.
Construction costs for complexes built using the New Block design can run nearly 35% below the norm, thanks to wood construction, surface parking and green roof features, among other design aspects, according to Newman Garrison.
The Buena Park apartment homes will be marketed to residents earning 30% to 60% of OC’s median income, according to the architect.
Irvine’s Jamboree Housing Corp. will be developing the project and it’s slated to be completed in 2012.
