ORANGE COUNTY OFFICE MARKET PICKS UP IN SECOND QUARTER;
ABSORPTION REBOUNDS, MID-YEAR REPORT REVEALS
NEWPORT BEACH, Calif., July 9 /PRNewswire/ -- The Orange County office market showed signs of improvement at mid-year 1992, with vacancy rates stable and net absorption up slightly from a year ago, according to a report released today by Grubb & Ellis Commercial Services.
The vacancy rate for the Orange County office market remained virtually unchanged at 21.7 percent.
Net absorption was up at mid-year, with a total of 522,107 square feet of office space absorbed in Orange County during the first six months of 1992. While an increase over the 378,958 square feet absorbed during the first six months of 1991, that total is substantially below the average 1.7 million square feet of absorption posted by mid-year during the late 1980s.
Grubb & Ellis predicts that activity will increase in the second half of the year and forecasts total net absorption of approximately 1.25 million square feet for 1992.
Net absorption for the second quarter totaled 417,880 square feet, up from the previous quarter's total of 104,227 square feet, as well as 1991's second quarter total of 188,117 square feet.
"Activity in the market is picking up as we slowly come out of the recession," said George Economos with Grubb & Ellis' Newport Beach office. "Most tenants are still cautious and are taking the same amount of space or downsizing, however, a handful of tenants are expanding and some R&D tenants are moving up, which accounts for the increase in net absorption."
Gross leasing activity for Orange County totaled 1.1 million square feet at mid-year.
Reflecting the continued slow pace of new development, there was no new speculative office construction started for the second quarter in a row in Orange County. By contrast, during the second quarter of 1991 there was 1.7 million square feet of office space under construction, the majority of it in the Airport Area. There are no plans for any new speculative office buildings to start construction for the balance of 1992.
Claiming the vast majority of Orange County's newest office product, which is still in the lease-up phase, the Airport Area posted a vacancy rate of 23.7 percent. South County followed with a vacancy rate of 22.2 percent; Central County, 20.4 percent; West County, 18.1 percent; and North County, 16.6 percent.
"With no new construction, the market will begin to tighten up for new space first," said Economos. "Tenants with requirements in excess of 40,000 square feet of new space now have only about eight buildings to choose from in all of Orange County, all of them in the Airport Area.
"However, with all the product available on the market, tenants are still finding very attractive rental rates, which is generating more leasing activity," Economos added. "Tenants realize that with no new construction, rental rates won't remain at their current levels forever."
The Airport Area led the county's submarkets in net absorption during the second quarter with 196,163 square feet, followed by Central County with 122,724 square feet, and North County with 83,043 square feet.
"Overall, activity is up in Central and North County," said Dave Lane with Grubb & Ellis' Anaheim office. "One change we're seeing is that medium-size users are coming back into the market.
"For example, at Bentall Executive Centre, a Grubb & Ellis listing in Santa Ana, there has been an increase in the number of requests for proposal from users with requirements from 10,000 to 20,000 square feet," Lane said. "Last quarter, the majority of RFPs were from tenants seeking from 2,000 to 5,000 square feet."
/CONTACT: Sharon Abar of Grubb & Ellis, 714-937-0881/ CO: Grubb & Ellis Commercial Services ST: California IN: SU: AL -- LA008 -- 7838 07/09/92 12:22 EDT