| |
|
MARKET SHOWS SIGNS OF STABILTY; BUT DOWNTURN IS NOT YET OVER
The national economic downturn and collapse of the mortgage-finance industry has severely impacted the Orange County office market. Fortunately, Q2 2008 data suggests that the market is nearing the bottom and the worst may indeed be behind us. Net absorption for Q2 2008 was (-229,900). This is now the fourth consecutive quarter of negative net absorption, following -1.1 million SF last quarter, and -1.6 million SF in the second half of 2007. The pace of space returning to market has slowed, and we are beginning to see some signs of stability. The market, however, remains tilted towards the tenant, and we expect increased landlord concessions, as well as a continued reduction of asking rental rates in future quarters.
Vacancy rates climbed to 18.1%, up from 17.3% last quarter and from 11.0% a year ago. Asking rental-rates declined overall for the second quarter in a row. These recent declines in were the first in four years, following strong advances from 2005-2007.
In Q2 2008, 420,200 SF of space came on-line due to construction completions. Construction activity has slowed significantly, and only 170,000 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 higher in the second half of the year, causing rental rates to further decline or flatten 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.
  OFFOC08Q2.pdf
Email Report Link To Your Friend
|
|