OC Office Picture Looking Rosier

ORANGE COUNTY-Market fundamentals for the Orange County office sector continue to improve, experts say. Vacancy continues to tighten as available space becomes ever scarcer, lease rates have begun to increase modestly from second-quarter figures and absorption—particularly in the class-B space—is up.

According to a report from Voit Real Estate Services, an overall increase in investment activity in the coming quarters is expected, and an increase in leasing activity is also anticipated as many short-term lease deals come up for renewal. “As job creation continues and consumer confidence stabilizes, the office market will continue to recover,” the report states.

Cushman & Wakefield reports that office vacancy improved during the third quarter with a 1.5 percentage-point decrease to 14.8% from a year ago, the lowest rate since first-quarter 2008. Leasing activity cooled slightly to 5.2 million square feet, compared with 5.7 million square feet leased last year at this time, and occupancy gains picked up to 1.3 million square feet an increase of 17.3% over last year.

According to Cassidy Turley, the Anaheim-Santa Ana market office vacancy rate remained unchanged at 16.8% from second-quarter to third-quarter 2013, but that was a slight decrease from 17.6% in first-quarter 2013 and a significant decrease from 19.1% in third-quarter 2012. While the first two quarters of the year saw office absorption of more than 1 million square feet in this submarket, negative absorption of -8,000 square feet was noted in the third quarter. Lease rates have continued to rise slowly in that submarket, from $22.82 per square foot in third-quarter 2012 to $23.47 per square foot in third-quarter 2013, Cassidy Turley reports.

As GlobeSt.com reported last week, Newport Center Dr. Newport Center Dr. ranks 10^th on the list of most-expensive streets for renting office space in the country, according to Jones Lang LaSalle. The average monthly rental rate for office space on that street is $50.06, the firm reports.

 “We are beginning to see a decrease in the amount of vacant and available space [in Orange County],” say Jerry Holdner, VP of market research, and Tony Tran, market research analyst, of Voit. “As we progress into the last quarter of 2013, positive absorption should continue, and with few new deliveries in the pipeline to apply upward pressure on vacancy, the market will continue to stabilize.”