The Orange County office market started off 2017 in the black, fueled by growth in the Central County, notes Cushman & Wakefield in its Q1 2017 report. At the beginning of 2017, the office market started with its fundamentals healthy, but realized flattening across the board. One factor to keep an eye on is the 2.2 million square feet of construction activity underway that could deliver in 2017.
Cushman & Wakefield’s John Harty says, “Central Orange County is experiencing very robust leasing activity, guided in recent months by both large transactions signed, as well as actual occupancies commencing.”
Key report findings include:
- Vacancy: Overall and direct vacancy rates remained steady, just outside single digits at 11.1% and 10.7%, respectively.
- Year-over-year, overall vacancy is down 10 basis points, while direct vacancy saw zero basis-point change.
- Leasing & Occupancy: Leasing volume continues to trend downward since Q1 2016, when leasing activity was at its highest, at 2.3 million square feet (msf). Showing a 22% decrease year-over-year, leasing activity closed Q1 2017 at 1.8 msf.
- Net absorption continues to show positive, but at a more subdued level in Q1. With 126,000 square feet (sf) of positive absorption, there still are indications of healthy market conditions. Central County had the most net absorption at 227,000 sf, fueled by activity in Santa Ana.
- Construction: The Greater Airport Area is comprised of all speculative projects, with approximately 537,000 sf or 35% of the tracked inventory/projects.
- South County has more square footage under construction with 1.7 msf, with a blend of Build-To-Suit and speculative product types making up 77% of development projects.
- Rental Rates: Reflecting a slower incline of asking prices across the county, rents stayed at $2.34-per-square-foot per-month full service.
- Capital Markets: Sales activity is up 13% year-over-year at 963,000 sf, with 12 of the 13 sales recorded as Investor sales. However, this is 22% lower than annual quarterly average of sales in 2016.
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