By SIMON DILLON
The office market in the John Wayne Airport/Central Coast area is about to dip to single-digit vacancy rates.
In the first quarter, office vacancy was 10.1%, down 21.8% versus a year earlier.
As expected, asking lease rates for office space are rising, though the statistics still don’t show just how fast the “effective” signed lease rates are moving. That’s because there used to be much more negotiating room between asking and effective lease rates.
Effective office lease rates hit a low watermark in fourth quarter 2003 in the airport/Central Coast area, according to CB Richard Ellis Group Inc. data. Built-up demand is expected to continue pushing rates up, with a rental spike anticipated by the end of the year.
Tenants need to identify solid second and third options when shopping for office space. Gone are the days where you could focus on your first choice space and get a straightforward deal done.
Now there are bidding wars for quality office space in the airport/Central Coast area. CB Richard Ellis just signed a deal at Inwood Park, an Equity Office Properties Trust building, which now is full. More than three tenants were bounced in the process.
The office market is very different from a year and a half ago when landlords were fighting to lure tenants.
Activity remains brisk, with 509,509 square feet of absorption in the first quarter.
Asking rental rates were $2.19 per square foot in the period, up 4.8% versus a year earlier. Rates aren’t being challenged by tenants and should increase dramatically by the end of the year.
The recovery will be different this time. With little developable land left and the trend of rezoning office land to residential, the supply of office space is expected to stay tight.
The next office towers are set to be built in areas with plenty of shopping and other services, such as Maguire Properties Inc.’s Park Place project in Irvine.
Dillon is a vice president in the Newport Beach office of CB Richard Ellis Group Inc.
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