Orange County, CA, (July 2, 2013) – The Orange County office
market demonstrated new signs of recovery in the second quarter of 2013,
posting over 730,000 square feet of positive net absorption and ending the
quarter with the first increase in average asking lease rates seen since 2007,
according to a new Second Quarter Market Report from Voit Real Estate Services.
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| Jerry Holdner |
“This is
good news for the Orange County market overall,” explains Jerry Holdner,
Vice President of Market Research at Voit.
“The rise in rates, while modest, demonstrate a bottom in the downward
trend of asking lease rates, which further supports the recovery we’ve been forecasting
for the past 12 to 24 months.”
Lease
rates rose from $1.88 to $1.89 in Q2 2013, and Voit forecasts that these rates
will continue to increase in 2013.
“The
gradual rise of rates, coupled with the slowing of concessions, which we’ve
seen over the past 24 months, will begin to push net operating incomes and
property values higher,” says Holdner.
“As a result, we anticipate an overall increase in investment activity
in the coming quarters.”
Demand for Class A Office Product Returns
As a
whole, the Orange County office market posted over 1.3 million square feet of
positive net absorption in the first half of 2013, giving the market a total of
over six million square feet of positive absorption over the last three years,
according to Voit’s report.
One
trend to note, according to Holdner, is the resurgence of demand for Class A
space in the second quarter of 2013.
“In the
first quarter of 2013, all office absorption was in Class B buildings,” he
explains. “In the second quarter,
470,000 square feet of positive absorption was in Class A space, while only
250,000 square feet was Class B. The return to Class A demonstrates ongoing
confidence in the office market, which will continue to fuel market recovery.”
As the
recovery continues, Holdner notes that research-oriented businesses such as IT,
defense, medical, and alternative energy will lead the charge of positive
absorption in the Orange County office market.
Vacancy and Availability Continue Downward Trend
Vacancy and availability also
declined in 2013’s second quarter, demonstrating further market strength,
according to Holdner.
Vacancy
in direct/sublease space finished the quarter at 12.49 percent, a substantial
decrease from the previous year’s rate of 14.53 percent, and a significant
decrease from the Great-Recession peak of 18 percent, which was reported in Q2
of 2010.
“We are
forecasting that vacancy will continue trending downward in 2013, ending the
year around 11.6 percent,” says Holdner.
Availability
also decreased in 2013’s second quarter, with all space being marketed
(including direct, sublet, and occupied) dropping to 17.78 percent - a decrease
of almost 6.5 percent when compared to 2012’s second quarter rate of 19.02
percent.
“As we progress into the second half
of 2013, we expect to see further improvement throughout the Orange County
office market,” says Holdner. “Positive
absorption should continue, lease rates will likely continue to rise, and we
anticipate that overall activity will increase over the next two to three
quarters.”
For a complete copy of the
company’s news release, please contact:
Jenn Quader / Judith Brower
Brower, Miller & Cole
(949) 955-7940
