Report Sees More Office Softness in 2002

ORANGE COUNTY, CA-The county’s office market will remain relatively weak throughout the first half of 2002, a new report by Grubb & Ellis says, but will stage a mild recovery in the final six months of the year.

The report says the county’s overall office vacancy factor is currently 10.8%, but a higher 12.3% at class A buildings. It stops short of forecasting exactly how high those rates will go in the first half of next year, but says the gap between what landlords want to charge and what tenants are willing to pay will continue to narrow “as the supply of available sublease and direct space continues to expand while the number of tenants actively in the market remains low.”

“Once thought to be too diversified to feel the effects of all but the most dramatic national economic swings, the county’s residents and businesses must now face a world where there is neither an unending supply of venture capital or expanding businesses,” the brokerage firm’s forecast says. “As landlords learned in 2001, vacancy rates can increase and there can be negative absorption, even in the most well located and highly amenitized office buildings.”