Office Leasing Going Well, but Vacancy Rate Is Still High
Landlords leased 1.1 million square feet in Orange County’s larger office buildings during the first 3 months of the year.
But office buildings were still 22% vacant on the average because so many new buildings are going up, Grubb & Ellis Co. said Tuesday.
This means that rents did not rise very much during the quarter, the commercial brokerage said at a quarterly briefing on the local market.
It is unlikely that the next 3 quarters will be as busy. Grubb & Ellis estimates that tenants will lease 3.6 million square feet of office space in 1989, about the same as last year.
The vacancy rate was actually down from a year ago, when it was 25%. And tenants looking for upscale office space around Anaheim will probably find the market tight this year and rents beginning to rise.
Nothing will be built in the Anaheim area for the next 18 months, according to Lonnie J. Riddle, a senior marketing consultant at the Grubb & Ellis office in Orange.
Since four big new office buildings opened in the area, developers have delayed building new towers, and the market will eventually lurch toward fewer vacancies and higher rents until more buildings go up, Riddle predicted.
Elsewhere, construction is booming, especially at the Irvine Co.’s massive Spectrum development at the junction of the San Diego and Santa Ana freeways in Irvine.
As subdivisions sprout in the relatively undeveloped southern half of the county, the office buildings are following them, according to brokers attending the briefing.
Developers plan to build another 14.6 million square feet of office space around the county. That’s nearly a third of the county’s present total, 46.6 million square feet.
Rents were lowest in the western part of the county--with a low of $1.26 a square foot--and highest in the John Wayne Airport area, where the highest rent was $2.25 per square foot.
Meanwhile, warehouses and manufacturers of low-technology products continue to leave for Riverside and San Bernardino counties, where land is cheaper.
Yet certain types of industrial buildings--like those favored by smaller research and development firms--continue to lease well in the county, said Dennis W. Macheski, Grubb & Ellis’ regional director of research.
ORANGE COUNTY OFFICE SPACE BY REGION
Square Feet Rentable Vacancy Absorbed Market Area Square Ft. Rate in 1st Qtr. Airport Area 21,631,661 21% 670,778 South County 3,262,989 21% 65,787 Central County 13,762,266 25% 241,077 North County 3,542,825 29% 3,806 West County 4,398,867 18% 125,762 County total 46,598,608 22% 1,107,210
Source: Grubb & Ellis
COUNTYWIDE OFFICE SPACE ABSORPTION
1989 (1st quarter): 1,107,210
Source: Grubb & Ellis
