The Mid-Counties office market is a specialized market consisting of 12 cities along the border of Orange and Los Angeles counties. Due to its small size, the Mid-Counties market is prone to greater fluctuations in market indicators than larger markets.
The Mid-Counties office market grew by approximately 232,000 square feet in the second quarter of 2001, due to the completion of three buildings, the first new product added to the Mid-Counties market since the same quarter of last year. Construction completed on buildings II and III at the Warland/Cypress Business Center, and also at the second AT & T; Wireless building in Cerritos.
As the Orange County and Los Angeles office markets experienced vacancy-rate increases in the second quarter, the Mid-Counties vacancy rate rose to 15.5%, as well. In addition to the economic uncertainty that has affected the real estate market, new construction played a large role in the vacancy increase of the Mid-Counties market. Cypress experienced the greatest vacancy spike as the rate rose from 4.5% last quarter to 14.3% this quarter, due to the addition of about 128,000 square feet of vacant new product at the Warland center.
Despite the slowing of the market, net absorption made a major recovery from the negative 91,221 square feet experienced in the first quarter, to a positive 65,000 square feet in the second. Cerritos led the absorption turn-around with 110,076 square feet of positive activity, due to the full occupancy of the just-completed AT & T; Wireless building.
After resting at an average of $1.78 per square foot per month for the past two quarters, the asking rent for office space in the Mid-Counties rose to an average of $1.81 in the second quarter. Seal Beach remained the front-runner in the market, with an average asking lease rate of $2.42, a 34% premium over the average for the entire Mid-Counties market. Cerritos and Cypress each posted an 8-cent quarterly increase, to $1.98 and $1.90, respectively. At the other end of the rent spectrum, Lakewood posted the lowest average asking rent at $1.35 in the second quarter, a drop of 15 cents from the first quarter.
One building, an eight-story addition to the Cerritos Towne Center, remained under construction in the Mid-Counties market as the second quarter came to a close. Completion is expected in the first quarter of next year. Although four additional properties were in the planning pipeline for the Mid-Counties market, further development has been put on hold while the market continues to settle.
Analysis provided by CB Richard Ellis’ Global Research and Consulting.
