By DREW NETHERTON
The airport area office leasing market continued to see lower tenant demand and increased vacancy levels during the first quarter. The average asking lease rates came in at $2.88 full service gross, down about 10 cents from the fourth quarter.
The overall vacancy rate increased during the quarter to 15.9%, compared to the first quarter of 2007, when the vacancy rate stood at 9.1%. The first quarter saw 650,000 square feet of negative net absorption in the airport area alone, a majority of which can be directly attributed to the mortgage industry and mortgage-related companies.
Due to limited demand and higher vacancy levels, owners of office buildings have become aggressive in their pursuit of tenants and are offering increased concessions such as initial free rent and higher tenant improvement allowances.
At the same time landlords have put a heavy emphasis on retaining existing tenants. The preceding factors have created a “tenant’s market” and as a result the airport area should continue to see downward pressure on lease rates throughout the year.
The largest lease transaction during the first quarter was seen in the airport area. Memorial Healthcare inked a deal for 117,000 square feet at 17360 Brookhurst St. in Fountain Valley.
Other notable transactions during the first quarter were the signing of Environ Holdings Inc. for a full floor at 18100 Von Karman Ave. in Irvine and Waterfield Bank for two full floors at 18881 Von Karman Ave., also in Irvine.
Netherton is a vice president in the Newport Beach office of CB Richard Ellis Group Inc.
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