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ORANGE COUNTY, CA-Activity in the Orange County office market is beginning to drop off, as recent research points to negative net absorption, a rise in vacancy levels and a decrease in new construction at the end of the third quarter.

Third quarter 2001 brought a negative net absorption of 403,000 sf to the office market here, as reported by Delta Associates Inc., an affiliate of Chicago-based property giant Transwestern Commercial Services. This figure illustrates a significant drop from second quarter 2001, when the market experienced a positive net absorption of 564,000 sf.

Meanwhile, vacancy levels are on the rise. The direct vacancy rate here jumped from 10.3% at mid-year to 11.1% at the end of the third quarter, while the direct Class A vacancy rate rose from 12.5% to 14.3%.

As vacancy levels have risen, construction of new office projects here has slowed to a virtual standstill. “No significant construction began in the third quarter of 2001 in Orange County,” the Delta report says. “In fact it appears that construction was halted in some cases.

“As we head into the fourth quarter, the September 11th attacks could ironically prove helpful to the county’s office market. “We expect modest, positive impact on the LA/Orange County office market from ‘the war on terrorism,’” the report adds.

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