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NEWPORT BEACH, CA—A second quarter office report for Orange County issued Thursday indicates the market is near the bottom—but how long it stays there may be anybody’s guess.Colliers International’s office report for the second quarter shows the pace of negative absorption slowed during the period, and it’s expected to stay near that pace in the third quarter.

“The bottom is nearing—hopefully. It looks like the worst has passed, ” says Michael Gold, a regional analyst for Colliers.

The report shows 1.3 million sf of negative net absorption for the year, however 1.1 million sf of that came in Q1, with 229,000 of negative absorption in Q2, Gold points out. In the second half of 2007, Orange County experienced 1.5 million sf of negative net absorption. “This quarter we’re still negative, but it’s not nearly as bad as what we’ve been seeing in the past year,” Gold adds.

The airport submarket was the only area in Orange County that recorded positive absorption, but it was up only slightly, while the central area—Santa Anna, Anaheim and Orange—had the most negative absorption, at 350k sf.

One bright spot in ongoing tale of massive job losses in the subprime lending market, which vacated a large portion of Orange County’s office space in the past year, is that most of that space has already been counted against the area in negative absorption.

“I think most of the subprime space has already been brought back to the market,” Gold notes.Office construction also slowed in the quarter, with the report showing 170,000 sf of building space currently under construction for all of Orange County, down dramatically from 2.9 million sf of space under construction in the second quarter of 2007.

Asking lease rates fell from the first quarter to the second quarter, the report shows. The average lease price was $2.72 per sf full-service gross, down from Q1′s average of $2.75, and down from a peak during the second quarter of 2007 at $2.80.

“It’s starting to trend downwards and were forecasting that that’s going to continue,” Gold says. “I think the landlords are starting to realize they need to drop asking rates to get companies interested.”The average sales price dropped from $300 per sf in the first quarter to $291 per sf in the second quarter, according to the report.

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