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| Jerry Holdner |
Orange County, CA – The Orange County office market continued to
improve in 2015, posting over 850,000 square feet of positive net absorption
for the year. The fourth quarter of 2015
marked the eleventh consecutive quarter of rising lease rates.
The average asking
full-service gross lease rate finished the fourth quarter at $2.26, an increase
of eighteen cents from 2014’s average asking rate, according to a new Fourth
Quarter Market Report from Voit Real Estate Services.
“This is great news for
the Orange County market overall,” explains
Jerry Holdner, Vice President of Market Research at Voit.
“The rise in lease rates demonstrates that
the market continues to improve, which further supports the recovery we’ve been
forecasting for the past 12 to 24 months.”
Demand for Office Product
Increases
As a whole, the Orange
County office market posted over 850,000 square feet of positive net absorption
in 2015, giving the market a total of over 4.3 million square feet of positive
absorption since the first quarter of 2013, according to Voit’s report.
One trend to note,
according to Holdner, is the increase in construction. Total space under construction came in at
just over 1.8 million square feet for the fourth quarter of 2015. Most of the
current construction is occurring in the Irvine Spectrum submarket, 1.7 million
square feet. “We should see an increase
in construction in the coming quarters, as typically the cranes come out when vacancy
dips below 12%.”
As 2015 came to an end,
direct/sublease space (unoccupied) finished the year at 10.78%, a decrease from
the previous year’s rate of 11.5% and significantly down from both the
recession peak of nearly 18% in the third quarter of 2010 and the market high
of 23% recorded in 1990.
Holdner notes “We are
continuing to see a decrease in the amount of vacant and available space on the
market, even with new product being delivered.
As we progress into 2016, positive absorption and higher occupancy costs
should continue, new deliveries in the southern half of the county may apply
upward pressure on vacancy, and the market will further improve.”
Vacancy and Availability
in Industrial Market Reach Pre-Recession Levels
The Orange County
industrial market took significant strides toward continued improvement in 2015
with significant positive absorption for the year, a six-cent or 9.5 percent
increase in asking lease rates, and significant drops in both vacancy and
availability.
“Overall in the Orange
County industrial market over the last three years, vacancy has reduced 37
percent while availability has decreased 23.2 percent,” says Holdner. “The substantial decreases in vacancy and
availability are contributing to the gains in asking lease rates and sale
prices.”
Both vacancy and availability continued
trending downward throughout 2015. Vacancy ended the fourth quarter of 2015 at
2.33 percent, the lowest rate ever recorded and a drop of over 23.5 percent
from 2014’s fourth quarter. Likewise,
availability posted a rate of 4.47 percent at the close of the year, the lowest
rate in nearly ten years, and a decrease of almost 17 percent from 2014. The record low rate recorded for availability
was 4.29% in the fourth quarter of 2005.
As lease rates rise, sale
prices are also ticking up, notes Holdner, who attributes this trend to the
diminishing supply of industrial product for sale in Orange County,
particularly in buildings smaller than 100,000 square feet.
“Currently, only around
one percent of the inventory in the Orange County industrial market is
available for sale. This lack of supply
will continue to place upward pressure on pricing going forward,” he explains.
“Overall, it’s a great
time to be a seller, but we continue to be cautiously optimistic about the
Orange County market,” says Holdner. “We
continue to see improvement in both the office and industrial markets, and we
anticipate positive gains moving forward, provided job creation continues.”
For a
complete copy of the company’s news release, please contact:
Jerry Holdner
Voit Real Estate Services
(949) 263-5371
