08
Jul2014
Voit/CORFAC: Orange County Office Lease Rates Rise
Contact:Jerry Holdner(949) 263-5371Jholdner@voitco.com
Orange County, CA (July 7, 2014) – The Orange County office market showed continued signs of recovery in 2014, posting over 740,000 square feet of positive net absorption in the second quarter of 2014, the most positive absorption seen in one quarter since the first quarter of 2007. The second quarter of 2014 marked the fifth consecutive quarter of rising lease rates. The average asking full-service gross lease rate finished the second quarter at $2.00 per square foot per month, an increase of 5.82% from 2013’s second quarter average asking lease rate, according to a new Second Quarter Market Report from Voit Real Estate Services/CORFAC International.
“This is good news for the Orange County market overall,” explains Jerry Holdner, Vice President of Market Research at Voit. “The rise in lease rates demonstrates that the market continues to improve, which further supports the recovery we’ve been forecasting for the past 12 to 24 months.”Demand for Office Product Increases. As a whole, the Orange County office market posted over 6.5 million square feet of positive absorption since the third quarter of 2010, 3.5 million of that in the last nine quarters, according to Voit’s report.
“In the second quarter of 2014, most of the office absorption was in Class A buildings,” he explains. “As the quarter came to a close, totals show 586,000 square feet of positive absorption in Class A space and only 114,000 square feet in Class B. The return to Class A demonstrates ongoing confidence in the office market, which will continue to fuel market recovery.”
Another trend to note, according to Holdner, is the continued decrease in the amount of vacant and available space in Orange County. “We should see an increase in construction in the coming quarters, as typically the cranes come out when vacancy dips below 12%. Vacancy currently resides at 12.69%.”
As the recovery continues, Holdner notes that research-oriented businesses such as IT, defense, medical, and alternative energy will lead the charge for positive absorption in the Orange County office market.
Vacancy and Availability in Industrial Market Reach Pre-Recession Levels. The Orange County industrial market took significant strides toward continued improvement in the second quarter of 2014 with over 1.1 million square feet of positive absorption for the year thus far, a three-cent or five percent increase in asking lease rates, and drops in both vacancy and availability compared to a year ago.
“Overall in the Orange County industrial market over the last two and a half years, vacancy has decreased over 23 percent while availability has decreased a jaw-dropping 29 percent,” says Holdner. “The substantial decreases in vacancy and availability are contributing to the gains in asking lease rates.”
Both vacancy and availability continued trending downward throughout 2014. Vacancy ended the second quarter of 2014 at 3.77 percent, the lowest rate in over five years and a drop just over 12 percent from 2013’s second quarter. Likewise, availability posted a rate of 6.07 percent at the close of the quarter, a substantial decrease of almost 17 percent from a year ago.
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 two percent of the inventory in the Orange County industrial market is available for sale, and a large portion of that space is functionally obsolete. This lack of supply will continue to place upward pressure on pricing going forward,” he explains. “Overall, we continue to be cautiously optimistic about the Orange County market,” says Holdner. “We continue to see improvement in both the office and industrial markets, and we anticipate positive gains moving forward, provided job creation continues and consumer confidence stabilizes.”
About Voit Real Estate Services/CORFAC International
Voit Real Estate Services/CORFAC International is now an 11 office commercial real estate firm that, through its brokerage and real estate management professionals working together, provides strategic property solutions tailored to clients' needs. Combining more than 40 years of expertise in brokerage, investment advisory, financial analysis, market research, real estate management and tenant advisory, Voit provides clients with forward looking strategies that create value for their assets and portfolios.
Voit is a privately held, debt-free firm that has successfully navigated numerous market cycles since 1971 and currently employs more than 250 people. Voit has owned, developed and managed over 55 million square feet of commercial real estate, participated in $1.4 billion of construction projects and completed over $40 billion in brokerage transaction volume. Further information is available at www.voitco.com.
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