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ASKING RENTS DOWN AS VACANCY RATE CONTINUES
TO CLIMB IN ORANGE COUNTY
Job losses in the business and professional services sectors, particularly
in the mortgage finance industry, continued to have a negative impact on
the Orange County office market. Net absorption was negative for
the third quarter in a row at -1,135,700 SF this quarter, following -1.6
million SF in the second half of 2007. Also during the quarter, 433,200
SF of space came on-line due to construction completions. This caused
vacancy rates to climb to 17.3%, up from 15.2% last quarter and from 10.1%
a year ago. The market has tilted towards the tenant, and we expect
landlord concessions as well as a continued reduction of asking rental
rates in future quarters.
Asking rental-rates declined overall for the first time in four years,
following a slight increase last quarter (+0.7%), and strong advances earlier
in 2007.
Construction activity is down, and 616,200 SF is currently underway. Planned
projects continue to be announced; however it remains to be seen if and
when construction will commence given current market conditions. It
is likely that vacancy rates will climb throughout 2008, causing rental
rates to flatten or decline in certain segments.
The long-term outlook for the county, however, remains very favorable due
to a dynamic economy, projected population growth, scarcity of land and
a highly skilled and educated workforce.
Contact Michael Gold at 213.532.3247 for more information.
  OFFOC08Q1.pdf
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