Office Vacancy Rate Drops as Building Stops : Leasing: Unoccupied space falls to 20.6%, a full percentage point below the 1991 figure for the county, brokerage reports.

Bob Osbrink, a senior vice president with Grubb & Ellis, wanted to open a discussion of commercial real estate on a positive note.

Despite the ailing market, he reported, his Newport Beach office took in the most revenue during 1992 of all the national brokerage’s 48 bureaus.

“It is a testament to the depth and resilience of Orange County,” Osbrink said. “Even in the worst of times, there is a lot of opportunity.”

Indeed, the county’s office vacancy rate inched down last year to 20.6%, a full percentage below the rate at the close of 1991 and the lowest since the mid-1980s, the brokerage reported.

In their quarterly report on office, industrial and retail space, Grubb & Ellis’ Newport Beach brokers noted that the improvement was largely because construction was at a standstill; tenants were renting space already available. And with no groundbreakings slated for 1993, either, the vacancy rate should drop to 18% by year’s end, the company predicted.

Net absorption--the amount of space taken off the market by tenants--was a slightly different story. For 1992, only 918,917 square feet of office space was absorbed in the Orange County. That compared with a total of 1.4 million square feet for 1991. In 1988, by contrast, when big leases that now are practically nonexistent were being signed, net absorption peaked at more than 4 million square feet.

For the past couple of years, the news has been pretty much the same: too much space, too few companies expanding or moving here to fill it.

But this time, the brokers expressed an optimism based on the hope that the recession has bottomed out, along with rent rates in under-occupied buildings.

Lease activity should pick up this year as tenants start to realize that deals aren’t going to get any better, the brokers said.

“The question in everyone’s mind is, have we hit bottom” in rent rates? said George Economos, a senior vice president at Grubb & Ellis. “And the consensus is, yes, we have.” No new construction of industrial sites led to a dip in vacancy rates in that sector as well. The rate dropped to 17.1% for 1992 from 20.2% for the previous year, even though sales and leasing activity slowed.

Retail real estate fared the best in 1992, posting a vacancy rate of 5.1%. Last year was the first during which Grubb & Ellis tracked retail space vacancy and absorption.

Grubb & Ellis’ Newport Beach office did well last year, Osbrink said, by aggressively pursuing mid-size deals.

“In the 1980s, we went after the big corporate transactions,” he said. “There aren’t many of those around right now.”

The office’s top broker last year, Osbrink said, handled 84 leases and sales.

A question from the audience: How many transactions did the office oversee in total?

“Wasn’t that number also 84?” colleague Mike Randall quipped.

The actual number, Osbrink said, was 490.

Grubb & Ellis, based in San Francisco, does not release its own revenue figures. The company has been tracking commercial real estate in Orange County, however, for 10 years.

Orange County’s Office Market

The countywide vacancy rate for 1992 was lower than for the previous year, with only the North County area showing a greater percentage of space standing empty at year’s end. Vacancy rate and percentage change by region: Airport: 1991: 22.5% 1992: 21.7% Percentage point change: -0.8%

South: 1991: 24.1% 1992: 21.1% Percentage point change: -3.0%

Central: 1991: 20.6% 1992: 19.6% Percentage point change: -1.0%

North: 1991: 18.2% 1992: 20.8% Percentage point change: +2.6%

West: 1991: 19.1% 1992: 16.5% Percentage point change: -2.6%

TOTAL: 1991: 21.6% 1992: 20.6% Percentage point change: -1.0%