Few Deliveries, More Investment for Office

ORANGE COUNTY, CA-Recovery seems to be hitting the office sector as the amount of vacant and available space decreases and positive absorption comes to the area. As GlobeSt.com reported earlier this week, high demand for class-A space has driven office vacancy rates in Orange County down into the single digits and is spurring significant growth in asking rents, according to Jones Lang LaSalle, and Voit Real Estate Services reports that few new deliveries in the pipeline to apply upward pressure on vacancy means that the market will continue to stabilize.

Jerry Holdner, Jr., VP of market research, and Tony Tran, market research analyst, said in the report, “We foresee an overall increase in investment activity in the coming quarters. Lease rates have begun to firm up, and we expect them to increase in 2013. We should also see an increase in leasing activity as many short-term deals come up for renewal. As job creation continues and consumer confidence stabilizes, the office market will continue to recover.”

Jeff Ingham, senior managing director of Jones Lang LaSalle, tells GlobeSt.com that over the past couple of years, it's been difficult to determine the pace at which the Orange County office market has been recovering and how long it was going to be until it was back to a more balanced leasing environment between tenants and landlords. “Over the past two years, more than 58,000 jobs have been added in the county, and vacancy rates have fallen from the mid-20s to the mid-teens. Despite these improvements, average asking rates for the overall market have been pretty flat.”

However, Ingham adds, the picture becomes much clearer if you look at the market by individual submarkets. “Landlords are being able to push asking rents in the areas where tenant demand is high and supply is short. In the next one to three years, we expect this map to look even hotter as the lagging areas like the Central County and South County Class B markets eventually benefit from tenants who are sensitive to the rising prices of high-demand space.”