First quarter 2002 brought a reduction of 95,000 sf of sublet space, as reported by Delta Associates Inc., an affiliate of Chicago-based property giant Transwestern Commercial Services. This figure illustrates a marked difference from fourth quarter 2001, when 400,000 sf was returned to the market.
Meanwhile, construction levels have dropped from the 1.8 million sf that was under construction at year-end 2001. According to the Delta Associates report, there was 1.1 million sf of office space under construction in Orange County at the end of this year's first quarter and no significant construction starts.
The decrease in sublet space and construction levels has begun to create a favorable environment for a recovery, but the Orange County office market is still suffering from negative net absorption, a rise in vacancy rate and dropping rents. Negative net absorption for first quarter 2002 was 220,000 sf, as compared to negative 5,000 sf in last year's final quarter. In addition, direct vacancy increased from 12.3% to 12.8%, while rents continued to dip. The Delta Associates report predicts that rents will continue to drift down until 2003, when the market is expected to regain strength.
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