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ORANGE COUNTY OFFICE MARKET POSTS LOWER VACANCY RATE AND HEALTHY ABSORPTION IN THIRD QUARTER, REPORT REVEALS

 ORANGE COUNTY OFFICE MARKET POSTS LOWER VACANCY RATE
 AND HEALTHY ABSORPTION IN THIRD QUARTER, REPORT REVEALS
 ORANGE, Calif., Oct. 15 /PRNewswire/ -- Despite the stalled economy, the Orange County office market posted healthy absorption and a decrease in the vacancy rate during the third quarter of 1992 as tenants moved to take advantage of attractive rental rates, according to a report released today by Grubb & Ellis Commercial Real Estate Services.
 Witn?o new office space under construction and continued positive absorption, the office vacancy rate in Orange County continued its downward trend, falling to 21.2 percent in the third quarter, down nearly a full percentage point from the 22.1 percent recorded a year ago.
 Absorption, or the net change in occupancy from one quarter to the next, totaled 369,329 square feet in Orange County for the third quarter, down from 1991's third quarter total of 562,264 square feet.
 However, a total of 891,436 square feet of office space has been absorbed in Orange County through the first three quarters of 1992, down only slightly from the 954,328 square feet absorbed during the first three quarters of 1991.
 "Attractive rental rates are driving the activity in today's market, especially in the Airport Area," said Mike Russell, senior marketing consultant with Grubb & Ellis' South Orange County office. "Tenants see an opportunity to upgrade their space with little or no increase in cost and are taking advantage of it."
 The Airport Area and South County accounted for the majority of Orange County's total net absorption in the third quarter, with the Airport Area absorbing 228,102 square feet and South County 139,263 square feet.
 The Airport Area and South County also posted the county's highest vacancy rates of 22.7 percent and 20.5 percent, respectively. These two areas contain the majority of the county's newest office product, some of which is still in the lease-up phase and offers very attractive lease rates.
 "The market is tightening for office tenants with requirements in excess of 50,000 square feet in the Airport Area, however, smaller tenants still have many options to choose from both in the Airport Area and South County," said Russell.
 Contributing to the positive absorption in the Airport Area was the migration of tenants from other parts of the county. One area experiencing this phenomenon is Central County, which had 43,787 square feet of negative absorption in the third quarter and posted a vacancy rate of 20 percent.
 "With only one new office tower completed since 1988, tenants looking for new office space in Central County have few options available to them," said Tom Stilley, office properties specialist with Grubb & Ellis' Anaheim office. "As a result, those tenants are looking to the Airport Area, which has a wide variety of new product, even though they'd prefer to be located in Central County."
 Bentall Executive Centre in Santa Ana, Central County's only new office building, is currently 72 percent leased with 28,000 square feet of space out for signature, according to Stilley.
 Despite the migration of some tenants south, the majority of activity in Central County came from tenants moving within the market, Stilley noted.
 In the North County market, movement among tenants was lateral for the most part with some expansion, resulting in 3,640 square feet of positive absorption and a vacancy rate of 20.5 percent.
 West County showed growth in the amount of occupied office space in the third quarter, posting a vacancy rate of 17.9 percent and 42,111 square feet of positive absorption.
 The amount of office space under construction in Orange County remained at zero in the third quarter. November 1992 will mark the one-year anniversary of the absence of new office space construction in Orange County.
 "We won't see any new speculative construction until five-year rates reach a $1.80/square foot, at least for construction that requires traditional financing," predicted Russell. "Currently tenants can negotiate Class A space for $1.55/square foot in newer buildings. Until rates firm up it won't make economic sense to begin construction on new office space."
 -0- 10/15/92
 /CONTACT: Sharon Abar of Grubb & Ellis, 714-937-0881/ CO: Grubb & Ellis Commercial Real Estate Services ST: California IN: FIN SU:


ML-JL -- LA019 -- 0426 10/15/92 12:28 EDT
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Date:Oct 15, 1992
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