"We are beginning to see signs of overall stabilization andimprovement," in the county's office market, says JerryHoldner, vice president of market research for Voit. Holdner tellsGlobeSt.com that the most promising trend is that the overall totalof direct and sublease space available in the county remained at23.75% in the first quarter, the same as in the fourth quarter.

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Much of that 23.75% is the same space this quarter aslast―it was sublease space and has now gone back tolandlords as direct space. Holdner says that he's hopeful that theflattening in the amount of available space on the market is a signthat the market has bottomed out, although that remains to beseen.

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Holdner also points to an increase of 200,000 square feet in thetotal of office building sales for the first quarter when comparedwith the first quarter of 2009. The figure is not earth-shattering,he says, but it means that 2010 is off to a better start than lastyear.

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Despite the stabilizing signs, the county's office market stillposted negative net absorption of 414,162 square feet in the firstquarter, according to the Voit report, which tracks about 108million square feet. Delta Associates, which produces its report inassociation with Transwestern and tracks nearly 120 million squarefeet, pegs the negative net absorption at 936,000 in the firstquarter. Colliers reports more than one million square feet ofnegative net absorption in the quarter but still pegs the overallavailability at a figure close to Voit's, 23.2%.

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Colliers sees a positive note in that leasing activity "slightlyincreased from the previous quarter," but the company's reportviews the Orange County office market as "quite far off from arecovery." It says that tenants "continue to consolidate theiroperations while the creation of new companies is nearlynon-existent," meaning that office users continue to give backspace to landlords.

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One point on which the market-watchers are unanimous is that jobgrowth is essential for the market to recover. "It's all aboutjobs," says Holder. He says the consensus among economists seems tobe that the county will post job growth by the end of this year, aview that contrasts with the thinking a year ago, when "At thattime, most people didn't have any sense of when job growth wouldoccur," he says.

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Office rental rates, which reached record highs in Orange Countybefore the recession pushed them downward, continued to slide inthe first quarter. The average asking full service gross lease rateper month per foot in Orange County was $2.12 in the first quarter,a 10.55% decrease over last year's rate of $2.37 and five centslower than last quarter's rate, according to the Voit report. Itnotes that the record high rate of $2.77 was established in thefourth quarter of 2008 and that class A rates for the county areaveraging $2.29 FSG, with the highest rents in the Airport market,where they are averaging $2.41 FSG.

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New construction has tapered to the point that it is much lessof a factor in adding new space, according to the Voit report,which shows first quarter total space under construction at 305.500square feet, most of which was medical office space. "The slowdownin construction has and will ease the upward pressure on vacancyand the downward pressure on lease rates," Holdner's reportsays.

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Although the office investment sales activity slowed from theflurry of last year, Colliers points out that "Class A high riseoffice buildings located in Orange County continue to attractinterest frompotential buyers," citing the sale of Griffin Towersin Santa Ana. In that deal, Los Angeles-based Maguire propertiessold the office towers to a venture of Angelo, Gordon & Co. andLincoln Property Co. for $90 million, less than half the $200million for which Maguire refinanced the towers in 2008.

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