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Tuesday, May 24, 2022

REAL ESTATE WATCH: LOW-rise office SPACE

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The Orange County low-rise office market continued to be impacted by the nationwide downturn through the third quarter.

Unemployment levels in OC have risen to 9.4%, still below the statewide and national levels.

In the third quarter, the OC office market saw an increase in tenant activity, but deals are still sporadic.

The low-rise office market accounts for slightly more than 55 million square feet.

The county’s vacancy level grew in the third quarter to 14.3%. This represents a 3.1% increase from the previous quarter and a 14% increase from a year earlier.

The availability rate for the third quarter was 20.7%, which is a slight increase from 20.4% in the previous quarter. Both the vacancy and availability rates have continued to increase during the past year, but those increases have begun to level.

In the third quarter, low-rise office space posted negative absorption of 239,834 square feet, bringing the year-to-date total to negative 542,947 square feet. The South County submarket has contributed to 53% of the annual total with 290,362 square feet of negative absorption.

Due to the negative absorption, average asking rates have dropped throughout the year. In the third quarter alone, the average asking monthly lease rate was down 6 cents to $2.11 per square foot and down 11%, or 26 cents, from a year earlier.

With office space construction at a basic standstill, the county has about 8 million square feet of vacant low-rise office space to lease. Services providers have been the majority of large transactions to backfill office space, whether new construction or second generation space, but the third quarter was dominated by a number of small to midsize deals.

Bourne is a senior associate for the Newport Beach office of CB Richard Ellis Group Inc.

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