Metropolitan Office Space in California Outpaces Demand

It looks as if office space will still be up for grabs this year in California’s metropolitan areas.

The total combined-cities vacancy rate last December was 18%, according to estimates of the UC Berkeley’s Center for Real Estate and Urban Economics. The highest office vacancy figure shown was for San Diego, 25%, and the lowest of the metro areas was San Francisco, 12%.

Others listed in the Center’s year-end statistics are:

Los Angeles, 17%; Orange County, 18%; Alameda/Contra Costa I-680, 20%; San Mateo,15%; Santa Clara, 21%, and Sacramento 25%.

So far into 1986, statistics don’t show much change. “The state began 1986 with total vacancy space more than twice the level of average absorption,” pointed out Dr. Cynthia Kroll writing in the Center’s just released quarterly report.

Last year, Kroll wrote, many counties showed strong absorption, in part from a continuation of rental deals that kept “effective rates” far below asking levels.

In her opinion, while economic growth appears good, “absorption will not necessarily expand at the same pace if high absorption rates in the past two years represent a significant amount of anticipatory rating to take advantage of low prices.”

Office space construction in 1986 will remain strong, Kroll reported, in Orange County and in the Contra Costa Interstate 680 corridor. In total, California office markets can be expected to add at least 30 million square feet in 1986--and may approach the 1984 and ’85 levels of over 35 million square feet.