Vacancy Rate for O.C. Office Space Falls in 3rd Quarter : Real estate: The drop to 19.4% is due to the lack of new construction and to increased demand, Grubb & Ellis reports.
In a positive sign for the local real estate market, the amount of office space standing empty in Orange County continued to shrink in the third quarter.
The decline, however, was driven by the fact that almost no new offices were being built.
“We’re still bumping along the bottom as far as the real estate market is concerned, “ said Bob Bach, Grubb & Ellis vice president and regional research director of the Pacific Southwest region. “Commercial real estate won’t recover until later next year.”
Grubb & Ellis, a real estate brokerage that tracks the Southern California market, reported that the county’s vacancy rate was 19.4%, down almost two percentage points from the third quarter last year.
Positive signs for the local market included the dropping vacancy rate and the shortage of large blocks of space in certain sectors, Bach said. Despite the lower vacancy rate, however, net absorption--the amount of space taken off the market as new leases are signed--was less than half that of the second quarter this year.
There is only one major office building now under construction in Orange County, a site in Santa Ana where the State Insurance Compensation Fund has pre-leased a large block of space.
For the latest quarter, Grubb & Ellis reported that demand for industrial as well as research and development space increased.
Bob Osbrink, senior vice president and sales manager with Grubb & Ellis in Newport Beach, said he has noticed increased leasing and sales activity. In fact, 10 potential deals are now being negotiated that involve a total of nearly 1 million square feet of industrial space, he said.
“The general feeling is that the window is closing,” he said, so tenants are getting off the sidelines to buy or lease space while prices are low.
Research and development sales and leasing activity for the first nine months of this year totaled 2.7 million square feet, a 49% increase from the same period last year, Grubb & Ellis found.
The local vacancy rates should continue to decline because of the lack of construction as well as several transactions that have already closed and under which tenants are expected to move in later this year, said Thomas Fillmore, research director for Grubb & Ellis.
“We should have a good fourth quarter. I think the end of the year will have a strong finish,” he said.
Fillmore cited Loral Aeronutronics’ announcement that the high-tech company will lease nearly 347,000 square feet of space in a former GM Hughes plant in Rancho Santa Margarita, moving from a smaller plant in Newport Beach.
Another positive sign for the local market is a recent announcement by California Connection, an apparel manufacturer for discount and department stores, that the company will move from sites it now occupies in Los Angeles, Santa Ana and Tustin and consolidate operations in Santa Ana’s enterprise zone.
Less Manufacturing Space For Rent
Demand for manufacturing space in the county increased during the third quarter, with sales and leasing rising nearly 20%. The vacancy rate also dropped slightly. For the year through September, demand increased nearly 750,000 square feet, or 11%. QUARTER
Gross sales/leasing Vacancy (square feet) rate 2nd qtr. 2,278,570 19.62% 3rd qtr. 2,731,736 18.76% Change +453,166 -0.86%
*JANUARY-SEPTEMBER
Gross sales/leasing Vacancy (square feet) rate 1992 6,736,140 18.28% 1993 7,483,986 18.76% Change +747,846 +.48%
Source: Grubb & Ellis Orange County Research Service Group
