“In the first half of 2014, most of the office absorption was in Class B buildings,” he explains. “As the third quarter of 2014 came to a close, totals for the year show 518,000 square feet of positive absorption in Class A space; 406,000 square feet came in the third quarter, and 589,000 square feet in class B. The return to class A demonstrates ongoing confidence in the office market, which will continue to fuel market recovery.”

“We are continuing to see a decrease in the amount of vacant and available space on the market, even with new product being delivered. As we progress into the last quarter of 2014, positive absorption and higher occupancy costs should continue, and with few new deliveries in the pipeline to apply upward pressure on vacancy, the market will further improve.”

As the recovery continues, Holdner notes that research-oriented businesses such as IT, defense, medical, and alternative energy will lead the charge of positive absorption in the Orange County office market.

The Orange County industrial market took significant strides toward continued recovery in 2014 with significant positive absorption for the year, a two-cent or 3.2% increase in asking lease rates, and drops in both vacancy and availability.

“Overall in the Orange County industrial market over the last four quarters, vacancy has reduced over 20 percent while availability has decreased by 7.5%,” says Holdner. “The substantial decreases in vacancy and availability are contributing to the gains in asking lease rates and rising occupancy costs.”

Both vacancy and availability continued trending downward throughout 2014. Vacancy ended the third quarter of 2014 at 3.32%, the lowest rate since the second quarter of 1998, a drop of 20.95% from 2013's third quarter.

As lease rates rise, sale prices are also ticking up, notes Holdner, who attributes this trend to the diminishing supply of industrial product for sale in Orange County, particularly in buildings smaller than 100,000 square feet.

“Currently, only around one and a half percent of the inventory in the Orange County industrial market is available for sale. This lack of supply will continue to place upward pressure on pricing going forward,” he explains.

“Vacancy continues to drop, and the amount of available space has decreased significantly over the past year. A lack of product available for lease and sale in some size ranges (particularly anything below 100,000 square feet) is causing an increase in prices and a drop in transaction volume. While these are certainly positive indicators, job creation will need to continue in order to drive the demand needed to sustain growth in the Orange County industrial market.”

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