The South Orange County office market saw continued improvements during the third quarter, finishing with a year-to-date increase in positive net absorption of 355,936 rentable square feet.
South County accounts for 83% of the year-to-date total of 428,370 square feet of positive absorption for all of OC in the office segment.
The third quarter marked the first back-to-back quarterly gains for all of OC since 2006.
The third quarter alone saw 381,127 in net office absorption for South County, which accounts for 73% of all of OC.
Asking rates on office leases continue to play a role, and tenants are still taking advantage of persistent declines. The average asking rate dropped to $2 per square foot in the third quarter from $2.25 a year earlier.
Declines are expected to continue based on the 3.7 million of vacant space that remains on the market in South County.
The lower average lease prices and higher rates of absorption pushed vacancy rates down to 16.2% in the third quarter, compared to 16.7% a year earlier.
The county’s office market is entering a period of flux, and a major increase in employment is seen as the clearest path to recovery.
The vacancy rate for manufacturing and warehouse space rose to 5.9% in the third quarter from 5.2% a year earlier. That appears to be tied to a decline in distribution and manufacturing employment in the past year in OC.
The research and development sector saw a rise in the vacancy rate in the third quarter, finishing at 5.8%, up slightly from a year earlier.
Retail has seen the largest increase in vacancy in the past 12 months, up to 9.5% in the third quarter from 8.1% a year earlier.
Average asking rates continued to fall in the industrial market, down to 63 cents per square foot in the third quarter from 67 cents a year earlier. Rates for research and development sector fell to 96 cents in the period from 99 cents a year earlier.
Asking rates on retail have been the most firm in South County, averaging $2.92 per square foot, down slightly from $2.98 a year ago. Continued increases in vacancy will likely push asking rates for retail space in South County down further.
With holiday season in full swing, retail employers nationwide hired 150,900 extra workers this October, up from 47,800 last year. Nourse is an associate in the Newport Beach office of CB Richard Ellis Inc.
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Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
