The office market recovery has slowed in Orange County—but by all metrics, the sector has continued to perform. According to the first quarter report from JLL, the office market availability rate and vacancy rate continued to decrease, down 3% and 1% respectively for the quarter, and rents in the market increased 1.5%.

Small box office deals of less than 10,000 square feet drove leasing activity. These deals accounted for 61% of all office leases in the quarter, which the report says illustrates a preference for smaller spaces as some companies shrink their footprint in the wake of the pandemic. When measured by square foot, overall leasing activity was down for the quarter, but in terms of lease deals signed, activity was up 10%. Looking at activity by submarket, the Airport Area was the leader. Total absorption in the Airport Area turned positive for the first time in two years with more than 238,000 square feet of class-B space was absorbed in the first quarter.

There were some market challenges. While rents overall increased 1.5% to $2.81 per square foot for the quarter, effective rents actually fell due to increased concessions from landlords. In particular TI allowances increased 25%. Overall, net absorption was a negative 96,832 square feet for the quarter and the total market vacancy rate was 16.2%.