The office market in Orange County held up in the secondquarter. According to a new report from JLL, thelocal office vacancy rate remained flat at 13.9% and asking rentsremained flat at $3.11 per square foot. Absorption rates alsoremained flat but negative at -381,042 square feet. The marketperformance was better than most expected, but also a sign that theworst could still be yet to come.
"The market doesn't react very fast," JeffIngham, senior managing director at JLL, tellsGlobeSt.com. "There was some negative net absorption and rentalrates remained flat, but it wasn't crazy negative. It wasn't nearlyas bad as it was in 2008. That doesn't mean that it isn't going tochange in the future, but the reality is that it is too early totell. We are in the first inning of this, and it is still too earlyto know where it is going to go."
Looking at rents, Ingham said the market typically needs to seea change in tenant behavior and activity before a change in rentalrates, and that takes times. "Rental rates are still pretty flat,but to see a rental rate change, the market needs to test theavailability and tenant requirements," he says. "It needs to becompetitive for rental rates to really drop. Rental rates are basedon asking prices, and there is quite a bit of new construction. Newconstruction is going to be at a higher price. As things shape up,the market will act and react based on the competition anddemand."
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