The Mid-Counties office market is a specialized market consisting of 12 cities straddling the border of Orange and Los Angeles counties. Sixty-five properties totaling 5.5 million square feet comprise the base. Since it is relatively small, the Mid-Counties market is prone to greater fluctuations in indicators than most markets.
Following the regional trend, the Mid-Counties office market softened in the first quarter. After settling at a three-year low of 11.9% at the end of 2000, the vacancy rate for office space in the Mid-Counties market rose to 13.5% in the first quarter, spurred by consolidations and bankruptcies of a few major tenants. Despite the turn of vacancy, the market remained tighter than in the first quarter of 2001, when the vacancy rate for office space stood at 14.7%.
The Mid-Counties office market started off the year with negative absorption of 91,221 square feet. Nearly 43% of the negative absorption was in Cerritos, where MedPartners moved its call center out of two entire floors. Another 20% of the negative absorption occurred in Buena Park as the state of California outgrew its space in the Village Center. Santa Fe Springs experienced several smaller movements during the quarter; net absorption in the city totaled a negative 24,000 square feet.
The average asking lease rate for office space in the Mid-Counties leveled in the first quarter at $1.78 per square foot, after jumping up 6 cents the previous quarter from a plateau of $1.72. Seal Beach boasted the highest average rent of $2.45 per square foot, and although Cerritos has a few properties with asking lease rates in excess of $2.00, the city average stood below that threshold at $1.90. The asking rent for class A properties rose 1 cent in the first quarter to an average of $1.94, 9% higher than the county average for all building classes.
Although the amount of construction activity showed no change in the first quarter, two of the projects under construction neared completion. The Warland Cypress Business Center and Cerritos Corporate Center, Phase 2, were expected to complete construction in the second quarter. The other building, the 165,000 square-foot Cerritos Towne Center, will be under construction through to the second half of the year.
Analysis provided by CB Richard Ellis’ Global Research and Consulting.
