Orange County, CA Jan. 9, 2012 - In the fourth quarter of 2011, the Orange County office market displayed positive net absorption for the sixth consecutive quarter, posting 819,510 square feet – the most occupation of space since the first quarter of 2007, according to the Fourth Quarter Market Report from Voit Real Estate Services.
In addition, activity volume reached its highest level since 2006, and both vacancy and availability decreased from the previous quarter.
“In 2011, the Orange County office market posted a total of 2.55 million square feet of positive absorption, making this the longest trend of its kind since 2006,” said Jerry Holdner (top right photo), Vice President of Market Research at Voit. “This steady growth indicates that the office market is continuing its recovery and we expect the market will continue to improve with anticipated job growth.”
Employment expansion will be led by professional services businesses, healthcare, and research-oriented businesses such as medical, IT and alternative-energy companies, according to Holdner.
Increasing Demand Drives Activity Volume; Lease Rates Will Increase in 2012
In 2011, leasing activity checked in at 10.7 million square feet, a slight increase over 2010. Sales activity for 2011 also improved, with the market posting 2.6 million square feet of activity compared to 2010's 1.9 million square feet of sales transactions.
“We are beginning to see an overall increase in investment sales activity, and we foresee a continued increase in this activity in the coming quarters as lenders dispose of distressed assets without fear of fire-sale pricing,” commented Holdner.
“We also anticipate an increase in leasing activity as many short-term deals come up for renewal.”
According to Voit, the increase in activity will begin to push lease rates up. The average asking full-service gross (FSG) lease rate per month per square foot in the Orange County office market was $1.93 at the end of 2011, reflecting a 3 percent decrease from the previous year's rate of $1.99, but only a one-cent drop from the $1.94 rate seen in Q3 2011.
“While lease rates decreased year over year, it is important to note that the average asking lease rate dropped only one cent from the previous quarter, indicating that the downward trend of lease rates may be near an end,” said Holdner. “We are forecasting that lease rates will firm up in the early part of 2012 and will begin to increase in the second half of this year.”
Occupancy is Up in Orange County’s Office Market
The Orange County office market ended 2011 with low vacancy and availability. Direct/sublease, unoccupied space finished the year at 14.97 percent, a decrease from both 2011’s third quarter rate of 15.6 percent and the market high of 23 percent recorded in 1990.
“Occupancy has significantly improved since the Great-Recession peak of nearly 18 percent vacancy in Q2 of 2010, and we predict vacancy will continue its downward trend in 2012, ending the year at around 13.8 percent,” said Holdner.
Availability also decreased in Q4 of 2011, with all space being marketed (including direct, sublet, and occupied) at 19.44 percent - a decrease when compared to 2010's fourth quarter rate of 21 percent and slightly lower than the 2011’s third quarter rate of 19.82 percent.
The Q4 report indicates improvement in all areas of Orange County’s office market, according to Holdner, and the market recovery should continue as job creation increases and consumer confidence stabilizes.
Contact:
Judith Brower
Brower, Miller & Cole
(949) 955-7940
