Wednesday, October 15, 2008
Commercial real estate market is active, though leasing behaviors are somewhat conservative
|Real estate market reports for the third quarter are now complete, and the data shows that local businesses helped fuel the commercial real estate transaction pipeline in Orange County, even as the financial markets entered uncharted territory nationally.
While CBRE’s latest MarketView reports show continued negative absorption in both the office and industrial sectors in the third quarter, the good news is that lease transaction volume in both sectors continued at a steady pace – although average square footage and lease terms were down from a year ago.
There’s no question real estate decision makers associated with larger tenants and institutions are operating conservatively and demonstrating a concerned outlook. At the same time, in the third quarter we saw local businesses continuing to move forward in signing new leases and investing in small buildings and condos. While this is encouraging, the market remains very cautious about the potential effects of the national economy on local businesses.
In reaction to economic conditions, we’re also seeing the amount of sublease space on the market in the office sector continue to increase – up 6 percent this quarter. While some of this can be attributed to the continuation of mortgage company attrition in the market, the sublease statistics also indicate that as local companies cautiously move forward with operating their businesses, they are doing so with less people, causing industrial and office tenants to downsize and/or relocate to smaller quarters, and put a portion of their space on the market for sublease.
Obviously it will take a lot of small to mid-size deals to absorb the space we currently have available in Orange County, but the cautious optimism of local businesses speaks to our long-term ability to weather the current storm that is playing out now on the national and global economic stage.