Developers Still Making Room for Tech Tenants

Even as leasing to dot-com companies is showing slower growth, Orange County’s developers have continued to create the bulk of their new buildings for general technology-driven firms.

A new first-quarter survey by the Voit Commercial Brokerage found that space occupied mainly by Orange County technology firms has grown steadily. In the first three months, 64 million square feet of space existed in buildings that tech firms favor. In last year’s first quarter, there was only 59 million square feet of such room.

For the most part, almost all of the region’s new development “is built to accommodate technology-driven companies,” said Jerry Holdner, a Voit vice president who conducted the survey.

But the figures may be less rosy later this year. Concerned over the ability of dot-com start-ups to turn a profit, landlords have grown more cautious in leasing to them. Now, such companies are held to stringent credit standards that include guarantees that rent will be paid even if the firm goes out of business, dampening the market.

But the biggest factor propelling development plans are near-record vacancy rates. In the first quarter, Holdner said, the amount of empty space in the generally low-rise structures favored by technology firms was only 7.47%. That mark is barely off the record rate of 7.45% recorded during last year’s first quarter.

The tight market has allowed developers to charge record leasing rates. The survey found the average price per square foot was $1.43 in the first quarter, up from $1.34 in the same period last year.