Strong economic essentials such as a diverse labor pool and central Southern California location continue to attract both new and expanding companies to the region.
This strong desire to have a presence in the area has resulted in another quarter of office sector job growth as well as positive absorption of space.
With year-to-date absorption of positive 4.7 million square feet, the county has outpaced 2004 by 39%, which had a total of 3.4 million square feet of absorbed space.
This growth of activity has reduced the supply of office space available, particularly for tenants seeking large contiguous blocks. Of the roughly 92.6 million square feet of existing office space in the county, only 6.2% sits unoccupied, hitting a record-low vacancy rate.
The tightened supply of office space has transitioned the Orange County market to a more landlord-friendly environment, which has placed an upward pressure on rents.
Net Absorption
With the exception of the West County market, all OC office areas posted positive absorption this quarter to produce 952,113 square feet of positive net absorption, bringing the year-to-date total to 4.7 million square feet.
South County and the greater John Wayne Airport area combined for more than 90% of the total net absorption in the fourth quarter, with a total of 862,025 square feet.
Vacancy
OC vacancy rates fell from 6.8% to 6.2%, a 9% decrease from the third quarter and a strong 42% versus the past year. Vacancy levels continue to drop, due to the moderate pace of new construction and the favorable economy in OC.
Central County has the highest vacancy rate at 7.6%, while North County ended the fourth quarter with the lowest vacancy rate of 4.3%.
Asking Lease Rates
The average asking lease rate rose an additional 2 cents in the fourth quarter to $2.16 per square foot, but was substantially lower than the $2.30 average seen during the beginning of 2001.
Average asking lease rates in the greater John Wayne Airport area and South County declined in the quarter to $2.28 per square foot each. North and West counties climbed 8 cents to $1.83 and $1.99, respectively.
Construction
Construction completed on 20 buildings totaling 446,250 square feet at the end of 2005, an 81% increase compared to the third quarter.
Construction completed included 13 small office buildings of the 23-building Brenexus project in Irvine, which added 87,947 square feet to the OC base.
There is 2.4 million square feet of space under construction in OC.
Data and analysis provided by CB Richard Ellis Research.
