ORANGE COUNTY, CA-Orange County's office fundamentals strengthened significantly during first-quarter 2013, according to a report by Cushman & Wakefield Research. The county's overall vacancy decreased 2.4 percentage points to 15.57%, second among major Southern California markets only to San Diego, with a 14.2% vacancy rate.
Office leasing activity in the county surpassed first-quarter 2012 volume by 6.2% to 1.9 million square feet leased, and occupancy gains totaled 518,722 square feet, a marked improvement over the -143,768 square feet of overall absorption from first-quarter 2012. However, rental rates continued to decline for the sector, except in the Irvine Spectrum, where direct class-A asking rent increased 6.7% to $2.31 per square foot per month, according to the report.
The other major Southern California markets also saw gains, with San Diego's overall office vacancy declining 1.6 percentage points. There, occupancy gains of 86,047 square feet outpaced first-quarter 2012 gains by 16%, and leasing activity outpaced Q1 '12 volume, ending the quarter with 1.4 million square feet leased compared with 1.3 million square feet a year earlier. Direct class-A asking rent increased by 1.6% to $2.56 per square foot per month in San Diego.
Los Angeles County's overall office vacancy remained flat at 18.5%, according to C&W's report, with occupancy losses of 643,639 square feet attributable to the sluggish CBD and Disney vacating 400,000 square feet in Burbank. Leasing activity of 2.7 million square feet fell short of Q1 '12 volume by 10%, and rent growth was concentrated in select L.A. West submarkets.
Finally, the Inland Empire continued to improve with a 2.9 percentage-point decline in overall vacancy to 20.5%. While leasing activity was 20% below Q1 '12 leasing volume at 121,453 square feet, occupancy gains of 195,290 square feet were 30% higher than Q1 '12 gains, and rents remained flat year over year. As GlobeSt.com reported earlier this month, most of the office demand in Orange County is organic, meaning that the majority of growth has come from companies already located here, according to Jay Carnahan, managing partner of ORION Property Partners. “This has been happening for 35 years because of our diverse economic environment. While not all sectors are growing at the same rate, finance, tech and healthcare are all expanding.”
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
