A new report from Newport Beach-based Voit Real Estate Services points to stabilization in Orange County's office market.
The amount of office space available in the region stayed relatively flat in the first quarter, falling only .04 percent, compared to the previous quarter. The company also says that an uptick in new investors entering the market – which has spurred an increase in sales activity in the period – could help to lower vacancy rates.
"While the economy is still showing signs of weakness, which is affecting the commercial real estate market, we are beginning to see signs of overall stabilization and improvement,” says Jerry Holdner, vice president of market research for the firm.
He notes that net absorption – or the square feet leased in an area after deducting the amount of vacant space – posted a negative 414,162 square feet in the period. But, the number is significantly better than the average negative 750,000 square feet recorded during the last five quarters.
“Absorption isn’t anticipated to be positive until job creation begins once again in the Orange County job market,” he adds. But, there has been more positive employment news in recent weeks: The region had a 9.7 percent unemployment rate in February, down from a revised 10.2 percent in January. And, the region gained 10,300 jobs in the period.
Among the other highlights noted in the report:
Vacancy increased to about 18.3 percent in the first quarter, which is only a .37 rise over the prior quarter. The company attributes this to unleased sublet space being converted into direct vacant space.
Though the construction industry continues to struggle, with only 305,500 square feet under development in the period, the downturn actually will help vacancy and lease rates level out.
Leasing activity for the first quarter totaled 1.9 million square feet, only a slight decrease over the same time last year, which saw a total of 2.1 million square feet, according to the report. Although leasing activity is still "soft," sales have actually more than doubled since the first quarter of 2009, coming in at 543,230 square feet of activity, compared to 201,805 square feet.
Looking ahead, Voit expects to see an increase in investment activity over the next few quarters. The firm also anticipates an upturn in leasing activity, as many short-term deals come up for renewal and as job creation begins in the second half of this year.
"As we begin 2010, negative absorption has begun to slow, the amount of available space on the market has begun to decrease and with little new product in the pipeline, the market is beginning to show signs of stabilizing," finishes Holdner. "Once job creation turns positive and consumer confidence stabilizes, the office market will again turn positive."
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