ORANGE COUNTY, CA—While Orange County's total office vacancy rate decreased 30 bps in Q2 to the lowest levels since Q4 2007, sublease vacancy roses 40 bps, according to a recent report from Transwestern. To find out what might be causing this rise in sublease vacancy, we spoke exclusively with Liz Hurley, managing SVP of Transwestern, about the state of the sector and this anomaly.

GlobeSt.com: Why are sublease vacancies rising in the OC office market?

Hurley: We've seen an increase of nearly 250,000 more square feet of vacant office sublease space in the market compared to 12 months ago. It's an interesting statistic to watch because historically, as the overall economy and area office market becomes stronger one would expect sublease vacancy to decrease as well. But to answer your question, I think it's a combination of things like some tenants such as Avery Dennison and Mission Energy putting space on the market for sublease that everyone has been expecting for some time now. Also, there have been other tenants around the county who have been consolidating offices locally.

GlobeSt.com: Are these sublease vacancies concentrated in any one geographic area of the market?

Hurley: No, they're not. No single area of Orange County is responsible for the rise in sublease vacancy.

GlobeSt.com: What types of tenants are most attracted to the Orange County office market?

Hurley: We have a very diverse tenant base with a well-educated workforce. This cycle, we've seen increased activity in multiple sectors including healthcare, construction, engineering, real estate, financial services, professional services and technology.

GlobeSt.com: What else should our readers take away from your firm's Q2 Orange County office report?

Hurley: Our vacancy rates are now the lowest we've seen since the downturn—13% overall on the numbers we track. Unemployment is down, spec development is starting now from companies other than The Irvine Co., which is a good sign—and investment-sale activity is strong. It's really become a much stronger landlord's market compared to 12-18 months ago. There are a few pockets lagging, but primarily in The Irvine Co. portfolio and Class A office buildings in the immediate Airport Area, space is well leased and rates are pushing upward. Sublease vacancy is something to watch and keep note of since that could affect rental rate growth. Finally, we're seeing a lot of M&A activity, and with the recent news about both Allergan and Broadcom being acquired, it's definitely another thing to pay close attention to going forward.