Scott Wetzel

The Central Orange County office market has had an anemic start to the year. The market lost two large tenants to the Airport Area and has had negative absorption of 67,741 square feet—down 35 basis points, according to research from JLL. It isn't all bad news. Orange County office leasing, in general, has been flat this year, so the Central OC market is on trend. Even better, rental rates have continue to rise and the vacancy rate is down nearly a full percentage point year-over-year.

“2018 year-to-date net absorption is only down 35 basis points, so it's unfair to say Central County has experienced any significant negative absorption. Two large tenants, AAG and UFC Gym, who together account for 82,000 square feet, both relocated to the Airport Area,” Scott Wetzel, VP at JLL, tells GlobeSt.com. “Still, it's important to note that year-over-year vacancy rates lowered from 13.1% to 12.3% and rental rate growth remains strong. Over the past 12 months, average asking rates have increased nearly 13%. This is a healthy sign for the Central County submarket, especially in contrast to Orange County's most prominent submarket, the Airport Area, where rental rates are starting to plateau as double-digit rent growth has ticked down to the high single-digits.”

The Stadium Area is leading the submarket, with 8.6% vacancy rate and a $2.75 average asking rental rate. While it did lose two large tenants, the market has also seen several large lease deals, including a 66,818-square-foot US government lease in Tustin; a 61,002-square-foot lease in Garden Grove and 59,927-square-foot lease in Orange for the County of Orange; and a 52,095-square-foot lease for CNI College in Santa Ana. “Government and healthcare are far and away the market leaders. The County signed two deals totaling 127,000 square feet. As hospitals continue to expand, they are running out of room for administrative professionals, causing them to make way for doctors, nurses, physician assistants and patients,” says Wetzel. “This has caused several prominent healthcare companies to relocate and/or consolidate administrative professionals to free up space for medical personnel. Tangentially related is CNI College, a nursing school, who signed a lease for 50,000 square feet in Santa Ana. Lastly, we are also seeing the construction industry continue to expand, with several firms—such as Swinerton Builders—opt for a more centrally located facility so they can more easily access projects in L.A. County and the Inland Empire.