"The bottom is nearing—hopefully. It looks like the worst haspassed, " says Michael Gold, a regional analyst for Colliers.

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The report shows 1.3 million sf of negative net absorption forthe year, however 1.1 million sf of that came in Q1, with 229,000of negative absorption in Q2, Gold points out. In the second halfof 2007, Orange County experienced 1.5 million sf of negative netabsorption. "This quarter we're still negative, but it's not nearlyas bad as what we've been seeing in the past year," Gold adds.

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The airport submarket was the only area in Orange County thatrecorded positive absorption, but it was up only slightly, whilethe central area—Santa Anna, Anaheim and Orange—had the mostnegative absorption, at 350k sf.

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One bright spot in ongoing tale of massive job losses in thesubprime lending market, which vacated a large portion of OrangeCounty's office space in the past year, is that most of that spacehas already been counted against the area in negativeabsorption.

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"I think most of the subprime space has already been broughtback to the market," Gold notes.Office construction also slowed inthe quarter, with the report showing 170,000 sf of building spacecurrently under construction for all of Orange County, downdramatically from 2.9 million sf of space under construction in thesecond quarter of 2007.

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Asking lease rates fell from the first quarter to the secondquarter, the report shows. The average lease price was $2.72 per sffull-service gross, down from Q1's average of $2.75, and down froma peak during the second quarter of 2007 at $2.80.

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"It's starting to trend downwards and were forecasting thatthat's going to continue," Gold says. "I think the landlords arestarting to realize they need to drop asking rates to get companiesinterested."The average sales price dropped from $300 per sf in thefirst quarter to $291 per sf in the second quarter, according tothe report.

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