By SIMON DILLON
Expect demand for class B office space in 2006 to continue at the same strong pace as last year.
There was almost 3 million square feet of space absorbed in Orange County in 2005, with the vacancy rate falling from 11.1% to 6.5% at the end of the fourth quarter.
Even typically hard-to-lease spaces, such as second floor, non-elevator served offices, are leasing up.
Tenants need to be aware of existing rights on spaces they are pursuing. For example, LaSalle Bank, a tenant at John Saunders’ Northpointe in Tustin, recently exercised its first right of refusal on space which was about to be leased to a third party
tenant, Silex.
This was space that LaSalle was not even considering less than a month ago.
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Northpointe in Tustin: space leased up quickly |
LaSalle wanted to “control” the space. Fortunately for the third party tenant, the landlord was able to accommodate them in the last remaining space in the project.
There still remains some areas of opportunity: Two of the larger pockets of contiguous space are at Orange County Business Center in the John Wayne Airport area and Cypress Corporate Plaza in West County.
Orange County Business Center is owned by PS Business Parks and has about 58,000 square feet of open space.
Cypress Corporate Plaza has about 60,000 square feet of contiguous space for rent. Both complexes are very close to signing leases for a majority of the open space.
The scary thing for listing brokers is that space to lease is running out.
On the supply side, mortgage companies will ease the pressure quite a bit in the low-rise segment, which they tend to occupy.
With a slowdown imminent amid rising interest rates, some mortgage companies are giving up space to the sublease market.
This trend is happening right now and the pace of mortgage companies giving back space is expected to pick up. It’s not the worst time for this to happen for landlords.
Despite strong increases in asking rental rates, the mortgage company phenomenon has stalled pricing from rising to rates at which the buoyant market might normally dictate.
Dillon is a vice president in the Newport Beach office of CB Richard Ellis Group Inc.
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