Most office lease transactions in the county completed during Q1 involved in-place renewals.

IRVINE, CA—Orange County’s office market just finished a rather lackluster first quarter of leasing. According to a report from JLL, the majority of lease transactions completed in the first quarter of 2014 came from in-place renewals as opposed to new deals and relocations, resulting in negative absorption of more than 377,000 square feet.

The impact of Q1′s leasing activity should have a minimal impact on occupancy rates in the coming months as landlords search for more organic leasing activity growth, JLL reports. The county’s mortgage industry continues to struggle with an uncertain future in lending fundamentals, which has spurred several users to unload space onto the sublease market.

However, on a positive note, average asking rents and sale prices continue to climb, suggesting that both landlords and investors feel bullish about the market’s long-term prospects. This trend is most evident in Central County, where the leasing environment remains challenged with high vacancy rates (16.1% average, between class A and class B space), but sale prices are healthy and rising, according to JLL.

Some of the most notable lease transactions that took place during the quarter include:

  • OC Transportation Authority renewed 150,000 square feet at 550-600 Main St., Orange.
  • DRS Sensors & Targeting Systems renewed 91,000 square feet at 10600 Valley View St., Cypress.
  • DaVita HealthCare Partners signed a new deal at 54,000 square feet at 15271 Laguna Canyon Rd., Irvine Spectrum.
  • BB&T Bank signed a new deal of 44,000 square feet at 2400 Katella Ave., Anaheim.
  • Iteris renewed 41,000 square feet at 1700 Carnegie, Santa Ana.
  • Tesoro renewed 23,000 square feet at 6 Centerpointe, La Palma.
  • White Nelson Diehl Evans LLP renewed 22,000 square feet at 2875 Michelle Dr., Irvine.

JLL also reports that several large tenants are in the market for space of between 30,000 square feet and 65,000 square feet, including EDMC, Qualcomm, Western Growers and Biolase. was unable to connect with JLL prior to deadline to discuss these findings on a more in-depth basis but will continue to update this story as more information becomes available.

Lagging economic recovery in some California markets including Orange County has delayed construction of the latest creative-office concepts in these markets, as recently reported. Orange County, San Diego and Los Angeles are earlier in the creative-office evolution than the Silicon Valley because these markets are also earlier in the economic-recovery cycle, says Bill Halford, president and CEO of Bixby Land Co.

Halford tells that some of the more innovative applications of creative office have not yet hit these markets because “there hasn’t been a driving economy to drive people to develop new properties” in those regions. However, Bixby is just beginning to bring some of these new concepts to the Orange County and Los Angeles markets.