Despite the positive absorption figures, the market is still saddled with a considerable amount of available space, about 22.8 million square feet, according to Voit’s tally and about 22.2 million square feet by CBRE’s reckoning. But as Holdner points out, “That’s 8.6% less space available today than there was a year ago, and the good space is getting gobbled up.”

Overall, the statistics and comments from Ingham, Voit and CBRE show a market that’s a mixed bag. Absorption is up and concessions are down, but average rental rates are either flat or down. Voit shows a two-cent dip in the average asking rental rate in the second quarter, down to $1.94. Nonetheless, Holdner believes rents have pretty much hit bottom, and he points out that landlords are trimming some concessions. “A year ago you could get six months of free rent on a five year deal, but now you can only get three months in most cases,” he says.

Ingham also says that the market appears to have bottomed. He points out, “Three years ago, a lot of our clients here were trying to figure out what they were going to do with their space, whether to sublease it or not. Now a lot of that shadow vacancy has been filled, and there is a lot less sublease space on the market than two or three years ago.”

JLL figures show 19% direct vacancy and 19.5% total vacancy. Voit shows a direct vacancy of 16.42% and an availability rate of 20.64%, while CBRE shows direct vacancy of 15.5% and availability of 22.2%. Voit tracks about 110 million square feet of office space in the county, JLL tracks approximately 91 million square feet and CBRE follows just under 100 million square feet.

Both the class A and class B portions of the market are improving, but Holdner says that class A buildings are faring better these days because of the lower rents compared with pre-downturn days. “There is a flight to quality,” he says. “People who were in a class B building in a five-year lease can now move to a class A space and pay pretty much what they were paying for the class B space,” Holdner explains. As long as the rates remain low, he says, this likely means that class A buildings will fill up before the class B space, although both classes are posting absorption, he says.

Ingham says that much of the absorption in the market is coming from companies that have been in Orange County for some time. “They view this as a strong employment market,” he says. The industries that are growing include medical device and financial services firms, intellectual property law firms and other professional service firms. Since Orange County now has a relatively high unemployment rate compared with historical averages, Ingham adds, “Businesses can find the skilled people they need and hire them quickly. If you want to hire 150 people in the mortgage business, for example, it’s pretty easy to do it very quickly,” Ingham points out. The county also has deep pools of certain kinds of labor that can't be found just anywhere, he adds, citing workers in the medical device industry as an example.

According to Holdner, the office market is similar to the industrial market in that the big players who are well capitalized are the ones making the moves right now. “They see the opportunity and they have the means to do it,” he says.

Another measure of improvement in the market, he says, is the decline in the number of full floors of office space available. In the first quarter of 2010, 365 full floors of office space were available in the county. In the second quarter of this year, 259 full floors were available, according to the Voit research chief.

Ingham points out that the availability of full floors and contiguous space represents both a significant change and an opportunity for tenants. “Five years ago, someone wanting two contiguous floors of space couldn't find it, but almost every building in the market could put together a full floor in the next 12 to 18 months if they wanted to,” he says.

JLL’s list of highlights for the second quarter includes the sales of 4000 MacArthur Blvd. for $95 million, 4 Hutton Centre Dr. for $35.9 million and Pacific Corporate Plaza for $17.7 million. Ingham notes that investment opportunities are attracting buyers from outside the market, “and some groups who have put money into the market have fared very well.”

By contrast, buildings that are in special servicing “have really been paralyzed in terms of their decision-making processes,” Ingham says. “More than half of the class A market in Central Orange County is in some sort of special servicing,” he points out, limiting their capacity to compete against landlords with stable finances.