Office Vacancy Rate Dips 1.5% From Last Year : Leasing: Low prices help trim the percentage of unoccupied space back to a level that was typical before the recession.
Take lease prices that can’t go much lower. Add the fact that not a single new office building was born in Orange County this year. The result is more or less good news: a decrease in vacancy rates.
The office vacancy rate for the fourth quarter is 20.2%, down from 21.7% for the same period last year, according to statistics released Wednesday by CB Commercial Real Estate Group Inc.
That change of 1.5 percentage points might seem insignificant except that it brings the rate back down to the level that was typical before the recession.
Net absorption of office space--the amount of free space taken off the market--likewise improved slightly this year. Renters consumed nearly 1.2 million square feet, compared to about 1 million additional square feet leased in 1991. The survey covered 46 million square feet of office property in 505 buildings.
“We tend to believe that rents and the vacancy rates have bottomed out,” said John Ollen, senior vice president in CB Commercial’s Laguna Hills office. “With no new buildings coming on line, supply and demand is starting to have an impact.”
The average asking lease rate in the county at year’s end is $1.51 per square foot, down from $1.57 at the end of 1991.
Ollen predicted that the upward trend in occupancy and absorption rates will continue in 1993. “Businesses that had been waiting on the sidelines during the recession are starting to make some expansions,” he said.
Vacancy rates for industrial space also crept down a bit to 13.6% in the closing quarter of this year, compared to 13.7% a year earlier. Net absorption for the year, however, dipped to 9.4 million square feet from 1991’s 12.3 million square feet. The survey covers a total of 225.1 million square feet of industrial space.
Jerrold R. Cole, a senior vice president in CB Commercial’s Newport Beach office, said that most industrial transactions involved small and mid-size companies, rather than the big corporations that rented huge chunks of space in the 1980s.
“The large aerospace, engineering and defense companies have a lot of excess capacity on their hands, so we haven’t seen them in the market for quite some time,” Cole said. “For the most part, the users we’re seeing today are not nationally known companies but the smaller ones seeking low rents.”
In years past, many companies now signing lease agreements would have bought land instead for a build-to-suit site. “Today they have the alternative of cheap rents,” Cole said. “We saw very few land sales in 1992.”
