Office Market
After five years of expansion and the downturn of the past year, the Orange County office market has shifted to a phase of less new construction and stabilizing vacancy rates.
Vacancy Rates
The county office space vacancy rate rose at a slower pace in the first quarter to 15.8% vs. 14.9% in the fourth quarter. The largest vacancy increases were seen in West County and the John Wayne Airport area, a result of construction completed in those areas in the quarter.
Vacancy in North and Central County remained virtually unchanged from the last quarter, and South County,which suffered the greatest vacancy increase last year,showed signs of stabilizing in the first quarter with a moderate vacancy increase of 0.4%.
Absorption
Absorption increased more than 65% in the March quarter vs. the same period last year. North Orange County had positive activity for the first time since the end of 2000, absorbing nearly 159,000 square feet. Most of the negative activity in the quarter took place in areas where many spaces, particularly those leased by technology tenants, were vacated and marketed for sublease.
Lease Rates
Asking rates for many properties have been lowered to retain current tenants and spark new interest. After reaching a peak of $2.30 per square foot in OC in the first quarter of 2001, the market has stabilized at a county average of $2.10. The airport area and South County continue to have the highest asking rents in the county, $2.27 and $2.16, respectively.
Construction
Construction began tapering off near the end of 2001 and continued slowing in the first quarter. Seven new buildings were completed during the quarter, adding 653,077 square feet of space to the office market.
Only one building was added to the list of current construction activity in the quarter. The Vantis office project, a 178,000-square-foot, mid-rise building in Aliso Viejo broke ground in February and is 67% preleased.
Although nearly 11.7 million square feet are in the planning pipeline,much of which additions to existing projects recently built,most projects have been placed on hold until a new construction cycle begins.
Data and analysis provided by CB Richard Ellis Services Inc.’s Global Research and Consulting.
