CBRE also points out that the amount of sublease space on the market in the office sector increased in the third quarter by approximately 6%. "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 office tenants to downsize and/or relocate to smaller quarters and put a portion of their space on the market for sublease," the CBRE report states.

Holdner tells GlobeSt.com that rising sublease space is one of the factors that is driving down asking rents, which declined to $2.61 in the third quarter, down from $2.77 at this time last year. However, Holdner says that the overall amount of space on the market, including both direct and sublease space and new construction, is a bigger factor than sublease space alone. "There is just a lot of space on the market competing for the same tenants," Holdner says.

At the same time, Holdner points out that construction is slowing. The amount of new space under construction totaled 292,139 sf at the end of the third quarter, which is almost 90% lower than the amount that was under construction at this time last year. Voit estimates that a total of 1.7 million sf of new construction will be completed this year, most of which has already been delivered. "This will put less upward pressure on the recent rise in the vacancy rate," Holdner's report says.

Colliers International's report on the county's office market presents a similar view of the situation. "Although the Orange County office market has been one of the first areas in the Greater Los Angeles Basin to feel the effects of the economic slowdown—primarily due to its heavy concentration of real estate-related firms—this does not necessarily mean that the market is closer to the bottom" the Colliers report states. With office vacancies continuing to rise and average asking rental rates declining, Colliers says, "It appears thatthe Orange County office market is in the midst of a prolonged downturn expected to last through the remainder of 2008 and well into 2009." Colliers observes that Orange County today "is a far cry from just a couple of years ago when the Orange County economy in general and the real estate market in particular were among the strongest in the nation."

Voit's figures show that gross activity for the third quarter—the total of all leases and sales—was lower than last quarter at just over 2.1 million sf. That compares to an average quarterly gross activity level in 2007 of 3.2 million sf and an average of 2.8 million sf per quarter in 2006. "The recent lack of activity can be tied to the credit crunch as well, which means we could see an increase in activity in 2009 from pent-up demand once financial markets correct themselves," the Voit report concludes.