Jerry Holdner, vice president of market research with Voit, tells GlobeSt.com that of the space coming on line, three million sf is class A, with the remaining two million sf made up of class B space.
The five million sf in play is expected to hit the market in the next 18 to 24 months, according to Holdner. "The space is mostly in the Airport and South County markets." Of the space, roughly 2.8 million sf is in and around the Airport with the remaining development going up in the South County, where the product is divided fairly evenly between the Irvine Spectrum and Aliso Viejo markets.
Holdner says there are a few key dynamics to keep an eye on: "Positive absorption has cooled off from previous years." Net absorption for the quarter hit 391,227 sf, but that was way off the 730,000 sf per quarter average over the previous four years. In all, the County has experienced over 13 million sf of positive absorption over the past 18 quarters.
Lease rate growth is also slowing. The quarter witnessed only a 0.01 cent hike over the last quarter, while that increase has been in the 0.05 cent to 0.10 cent range over recent quarters. On the other hand, vacancy is nearing a record low of 7.5%. "It won't stay there for long," says Holdner. "It should pop back up to 10% quickly as product comes on line."
As for unemployment, for the third quarter it hit 3.6%. That number is 0.4% higher than it was when compared to the second quarter this year, and down 0.2% from the same period a year ago.
An economic report by Chapman University further underscores the local market dynamics, with job growth slowing its pace. According to the Chapman report, Orange County added 34,000 new payroll jobs in 2005 and is forecasting 26,000 new payroll jobs to hit the county by the end of the year. Another 21,000 jobs are expected to be added in 2007.
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