Yearend surveys by CB Richard Ellis Group and Voit Commercial Brokerage both show that the office space vacancy rate, which is just one gauge of the market's health, changed little during 2002, but did not increase as it had in the previous year. CB Richard Ellis described the vacancy rate as flat for most of the year, hovering between 15.5% and 15.8%, while Voit said the rate dipped to 14.52% by the end of the year, down from 14.78% at the end of 2001. Small differences in the vacancy rates quoted by different brokerages are not unusual because they typically employ different methods in calculating the rates.

In either case, the vacancy rate suggests a weaker market than the economic boom times of the late 1990s, and the rate is significantly higher than the 10% that most industry experts consider healthy. However, according to the CB report, "The story of 2002 has been the beginning of a recovery for the Orange County office market," as reflected in the stabilized vacancy rates and gradually increasing activity.

Both CB and Voit noted that less than a million sf of office space remained under construction in the county as of the end of the year, and they cited declining asking rents as a sign that landlords were adjusting to changing conditions. The average asking lease rate for office space in Orange County dropped a total of 18%, ending the fourth quarter at $2.04 per sf, down from $2.22 at the end of 2001, according to the CB survey. Voit pegged the average asking full-service gross lease rate per month psf in the county at $2.07, which is a 5% decrease over last year's fourth quarter rate of $2.18.

"Tenants remain cautious in the wake of economic concerns spurred by the recent job growth decline and the threat of war," the CB report said. That caution, it noted, is "keeping the overall Orange County office market neutral."