‘90 Was Slowest Year Since ’82 for Office Landlords : Leasing: Absorption rate dropped to 2.6 million square feet last year, down from a record 4.4 million square feet in 1989, according to study.

A new study shows that Orange County landlords leased less office space in 1990 than at any time since the recession year of 1982.

Absorption--an industry term for how much space was taken off the market--dropped to 2.6 million square feet last year. That was down from a record 4.4 million square feet in 1989, according to a study by the Newport Economics Group, a Newport Beach consultant.

The study also found that most of last year’s office leasing shifted to the southern half of the county, mostly around the giant Irvine Spectrum at the juncture of the San Diego and Santa Ana freeways.

The busiest office market is usually around John Wayne Airport, with as much as half the office leasing activity each year. But last year, the study found, the South County area accounted for a strong 45% of absorption, or 1.2 million square feet.

A lot of that space was occupied by relocations of big companies. For instance, Western Digital Corp., the computer products maker, moved into its own headquarters at the Irvine Spectrum.

The airport area, by contrast, had 30% of the market or 768,000 square feet. That left the rest of the county--from the airport north and eastward, including the big cities of Santa Ana and Anaheim--with the other 25%.

“There wasn’t a whole lot of activity once you got past the Spectrum and the airport,” said Robert J. Dunham, president of Newport Economics.

The central part of the county--including Santa Ana and Anaheim--had absorption of about 265,000 square feet.

Meanwhile, about 1.6 million square feet of space came on the market during the year, to bring the county’s total to 60.5 million square feet. That’s about the equivalent of 10 of New York City’s massive World Trade Center twin towers.

The amount of empty space over the second half of last year rose to 10.7 million square feet from 9.9 million.

On the bright side, the construction boom of the mid-1980s has finally tailed off as landlords struggle with empty buildings and low rents and lenders refuse to loan more money for construction.

But the slowing economy has also cut the stream of new tenants in Orange County, which saw record increases between 1986 and 1989.

Last year was also the first year since 1982 that absorption in the county dropped from one year to the next.

In fact, the study found that absorption started out fairly strong last year, with 1.8 million square feet through the first half of the year. But that plunged to 772,000 square feet in the second half of the year, after Iraq’s invasion of Kuwait and the economy visibly slumped.

About 17.6% of the space in the county’s office buildings was vacant last year, up a little less than a percentage point from 1989. Other recent studies have placed office vacancies at about 23%.

Newport Economics’s statistics differ from the more widely used figures put out by several large brokerages. The company counts smaller buildings in its survey and also includes buildings owned by their occupants, which the brokerages do not count.

The highest vacancy rates were found in the southern half of the county--despite the strong absorption there last year--because of a big construction boom in that part of the county south of the Costa Mesa Freeway.

Dunham says that the first half of 1991 will also be slow and that the year will probably end with the same lackluster office-market statistics as 1990. Absorption, for instance, will be about 2.5 million square feet.

By 1992, demand for office space should pick up again, he says, and absorption should reach 3 million square feet.

Orange County’s Office Market (square feet in millions) ‘82: 2.4 ‘89: 4.4 ‘90: 2.6 Source: Newport Economics Group