Office Vacancy Rate for O.C. Declines Again

Vacancy rates at Orange County office buildings fell to 13.96% at the end of June as more companies moved to bigger quarters, soaking up empty office space.

The rate dropped nearly two percentage points from the vacancy rate of 15.86% recorded a year earlier, according to data released Wednesday by CB Commercial Real Estate Group in Newport Beach.

The latest figure sends a strong signal that the commercial real estate market is recovering.

“We are on the comeback trail,” said Sheri Cameron, CB Commercial’s director of research. “We are seeing some extremely low vacancy rates in parts of the county and some real spikes in lease rates.”

Commercial vacancy rates in the county have been steadily declining since highs of 22% were posted in late 1991, and relocations by local companies are helping to fill up buildings.

“We’ve seen a lot of expansion recently by businesses already in Orange County,” said Carol Trapani, a CB Commercial broker.

Prime Financial, for instance, moved last month from Huntington Beach to larger quarters in Costa Mesa. The financial services firm, with 60 employees, expects to hire more workers as it continues to expand.

Vacant office space in the county decreased by almost 334,000 square feet to just over 6.7 million square feet. Buildings near John Wayne Airport and in the city of Costa Mesa benefited the most.

“We’re seeing a lot of interest in office space. It’s been more of a landlord’s market these days,” said George Economos, senior vice president of office properties at Grubb & Ellis in Newport Beach. “By the end of the year we could see vacancy rates lower than 10% in entire areas of the county.”

The Irvine Spectrum, the large industrial and office center built by the Irvine Co., had a low vacancy rate of 7.35%, according to CB Commercial, while Newport Center posted a 4.56% rate. Santa Ana Civic Center had one of the highest rates, with 40.2% of the available office space standing empty.

Industry experts said they were encouraged not only by lower vacancy rates but also by increases in the average rents on Orange County office space. The price increased one cent from the lst quarter to $1.47 per square foot at the end of June, the highest since 1993.

In South County, the average rent was $1.61, the highest in Orange County. The Anaheim Stadium area reported the biggest drop in average rent, down 4 cents to $1.41.

“The top-notch buildings are being gobbled up and prices are going up, but there are still vacancies in the lower-class buildings,” said Margaret Goedeke, a commercial broker and president of the Orange County Commercial Assn. of Realtors, a trade group.

“There are still lots of problems,” she said.

With no major new office construction expected this year, rents will continue to rise and vacancies decline throughout the year, CB Commercial predicted.

The retail market remained strong during the second quarter. Seven retail centers, totaling 1.6 million square feet of new space, are under construction in the county. The largest project is the 437,000-square-foot second phase of Tustin Market Place.

“It is definitely a mini-boom when it comes to retail,” CB’s Cameron said. “This may prompt vacancy rates to rise a little bit but there is strong demand here.”

The industrial market sector also posted strong gains, with higher rents and lower vacancies helping to fuel the construction of 21 new industrial buildings. Those projects will add 1.7 million square feet of industrial space to the county.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Office Outlook

South County and the area around John Wayne Airport had Orange County’s lowest second-quarter office vacancy rates. Vacancy rates, by area:

Airport/coastal: 10.20%

South: 8.75

Central: 23.25

North: 14.44

West: 14.44

Improving Trend

The countywide second-quarter vacancy rate was nearly two percentage points lower than in the same quarter last year. Here’s the trend:

1995

1st qtr.: 15.48%

2nd qtr.: 15.86

3rd qtr.: 15.70

4th qtr.: 14.56

1996

1st qtr.: 14.66

2nd qtr.: 13.96

Key

Airport/coastal: Corona del Mar, Costa Mesa, Fountain Valley, Newport Beach and parts of Irvine, Santa Ana and Tustin.

South: Aliso Viejo, Laguna Hills, Laguna Niguel, Lake Forest, Mission Viejo, San Clemente, San Juan Capistrano, Rancho Santa Margarita and the Irvine Spectrum

Central: Orange, Garden Grove, and parts of Anaheim, Santa Ana and Tustin

North: Fullerton, Buena Park, Placentia, Brea, La Habra, Yorba Linda and part of Anaheim

West: Huntington Beach, Seal Beach, Stanton and Westminster

Source: CB Commercial; Researched by JANICE L. JONES/Los Angeles Times