OFFICE MARKET: Entering 2005, the Orange County office market has considerably firmed up with positive absorption, a decline in vacancies, and landlord optimism that will see 7% to 10% percent rental increases. Orange County experienced net absorption of over 3.5M square feet in 2004. Within OC, the Airport area accounted for 1.6M square feet and South County 1M square feet.
The office vacancy rate dropped just under 10 percent to 9.9% for the first time since the year 2000. This reduction represents an almost 23% decrease from last year’s rate. Since demand is starting to challenge supply, developers are adding an additional 800,000 square feet of office product with an additional 4 million in the planning stages.
Rental rates will rise between 7% to 10% approximately this year. Currently, the average asking full service rental rate is $24.16. As the market continues to tighten, landlord concessions will also decrease.
In summary, Orange County will experience rental rate increases, a continued decrease in vacancy and landlord concessions, and an expansion to the economy with an additional 25,000 jobs and beneficial interest rates.
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