REAL ESTATE : Office Space Glut to Hamper Growth, Consultant Says

Orange County will be able to absorb about 2.7 million square feet of office space a year for the next five years, about 20% less than over the last five years.

That’s the forecast from Alfred Gobar, a Brea consultant. Gobar told a group of commercial real estate brokers recently that the market has bottomed out. The market should begin to recover, but growth will be far less robust than it was in the 1980s.

In the five years between 1985 and 1990, Gobar said, developers built more than 7 million square feet of office space a year while demand was less than 4 million. He called the overbuilding “gambling on the future.”

“The propaganda about the booming service sector of the economy created false enthusiasm for office space development,” Gobar said.

But in fact, white-collar employment has been dropping recently, Gobar said.

“However, I’m optimistic enough to believe that we’ve passed the bottom of the recession in demand for real estate,” he said. “With the start of the war, people are more settled because they know what is happening, and we’re seeing a return of consumer confidence at many levels.”

Gobar said offices would average 24% vacancy rates this year. He said that figure won’t drop in the near future. He estimates that the millions of square feet of empty office space could remain that way for more than eight years.

“I just don’t think that 24% will drop to 8% any time soon,” he told a meeting of the Society of Industrial and Office Realtors at Costa Mesa’s Center Club.

Meanwhile, industrial buildings aren’t nearly as overbuilt and have a lower vacancy rate, he said.

“There will be only short-term pain in the industrial market this year,” he said.