The North and Central Orange County office markets stayed stable during the first half of the year. The markets, though not as active as in the first quarter, absorbed a combined 48,581 square feet of space, giving them a total of 290,975 square feet of absorption year-to-date.
Signs
The numbers aren’t staggering but show signs of continued improvement and a healthy market that’s slowly rebounding from a tough few years.
The North and Central OC office markets were two of the hardest-hit markets during the most recent downturn, due in large part to the high concentration of mortgage and mortgage-related companies that occupied space in the area, as well as tenants looking to take advantage of the attractive lease rates in the Airport Area. Many of the area’s largest and most prominent buildings have faced difficulties in re-leasing office space as they’ve dealt with changes in ownership—many of the changes a result of loan defaults and a highly competitive office space environment.
Many of the issues have righted themselves in the past few quarters, and we’re now seeing a recovery taking place, with the potential to have lease rates spike and vacancy rates dip in the near future.
The vacancy rates in North and Central Orange County dropped from 14.9% a year ago to 13.1%, and as the supply tightens, lease rates will rapidly increase.
Tenants Reconsidering
Many tenants, with lease rates tightening and landlord concessions drying up in the Airport Area, are reconsidering Central and North OC as locations for their businesses. The markets’ central location to a large labor pool, freeway accessibility, public transportation, and quality office space make them good options for companies that want to service clients and recruit employees from all over Southern California.
Average asking rents are $1.81 per square foot, so North and Central OC remain compelling options to companies that are looking to get “more bang for their buck.”
Hill is a vice president at CBRE Group Inc.
