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SIGNIFICANT DETERIORATION IN OFFICE MARKET FUNDAMENTALS SHOWS MARKET HAS YET TO STABILIZE
In the first three months of 2009, any cautious optimism felt in the Orange County office market was shaken with significant deterioration in office market fundamentals. Market-wide net absorption was negative 1.1 million SF with the total vacancy rate jumping 90 additional basis points to
end the quarter at 19.5%. As a result, it is no longer a question of whether vacancy will hit 20% but how high will it go.
Weighted average asking rental rates saw their largest quarterly drop from $2.60 per square foot per month Full Service Gross (FSG) at year-end 2008 to $2.44 per square foot per month FSG. This represents a quarterly decline of 6% and is an 11% decline from the average asking rent of $2.75 PSF seen a year ago. It also indicates that the rapid rental-rate growth seen over the last three years has been virtually erased as market-wide rents are now back to levels last seen in 2006.
Although no new square footage was delivered this quarter and only 80,500 SF is currently underway, there is so much supply on the market from the construction boom of the last three years that it will probably take a few years for all this excess office space to be absorbed. On the other hand,
2009 is already shaping up to be a year where extremely favorable deals are there for the taking for those tenants in the market.
Contact Michael Soto at 213.532.3220 for more information.
  OFFOC09Q1.pdf
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