Orange County’s office vacancy rate dipped below the psychologically key threshold of 10% in the fourth quarter, Voit Commercial Brokerage LP said Tuesday.
The vacancy rate was 9.6% at the end of 2004, its lowest level since 2000, according to Voit. It was 10.5% in the third quarter, and 12.4% at the end of 2003.
OC’s average vacancy has been decreasing for the past several quarters. Breaking the 10% mark is significant because it usually means space is limited enough to force office rents up, according to industry sources.
Vacancy is declining as a result of more companies buying and leasing space than vacating it, which brokers track as absorption. Absorption totaled 689,260 square feet in the fourth quarter and 3 million for all of 2004,the 10th consecutive quarterly gain.
Industrial absorption was even better. It totaled 1.8 million square feet in the fourth quarter and 4.3 million square feet for 2004.
The industrial vacancy rate dropped to 4.3%, down from 6.1% a year ago.
“The strong decrease in vacancy rates will continue into 2005, putting more upward pressure on lease rates,” said Jerry Holdner, Voit’s vice president of market research, in a statement.
Holdner said lease rates should tick up 7% to 10% this year.
Voit also noted more office and industrial construction. At the end of the year, there was 700,000 square feet of industrial space under construction and 625,000 square feet of office space.
