Voit: Orange County Office Market Shows Signs of Stabilizing

April 8, 2010
By Allison Landa, News Editor

Courtesy Flickr Creative Commons user Alex E. Proimos

In Orange County, Calif., an office market hard-hit by the recession and in particular the disappearance of real estate-related businesses, there are signs of revival.

According to Voit Real Estate Services’ first-quarter Orange County Office Market Report, the percentage of office space available was nearly flat with a 4 basis-point decrease from the previous quarter – a sign that the market may have reached bottom and is preparing to rise. The numbers may be deceiving – negative absorption for the county was 414,162 square feet this quarter – but are given perspective by the fact that negative absorption has averaged 75,000 square feet over the past five quarters.

When discussing the report, Voit vice president of market research Jerry Holdner said that absorption is not expected to turn positive until job creation picks up. That may already be occurring; the unemployment rate in Orange County was 9.7 percent in February 2010, down from 10.2 percent the previous month.

Vacancy was on the rise, but only slightly. It grew to 18.32 percent for the first quarter, an increase of just 37 basis points over the previous quarter. Voit attributes this increase to unleased sublease space being converted into direct vacant space. “We should expect more upward pressure on vacancy even though availability is showing signs of leveling off,” Holdner noted in a statement.

While full service gross lease rates decreased, falling five cents over the previous quarter to a monthly average of $2.12 per square foot, leasing activity showed signs of stabilizing. There were 1.9 million square feet leased over the first quarter, a slight decrease over last year’s first-quarter total of 2.1 million square feet. However, Voit noted that sales activity has more than doubled since that time, coming in at 543,230 square feet as opposed to 201,805 square feet last year. The company attributed much of this to the lure of distressed assets, which is becoming an ever-common theme as investors reenter the market in search of high-value, low-cost acquisitions.

Voit was founded in 1971 and has developed, acquired, or managed more than 40 million square feet of commercial real estate and transacted sales and leases valued in excess of $25 billion.