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U.S. Office Vacancy Analysis 2nd Qtr 2010 (http://www.socalofficerealestateblog.com)
Decreased Office Rents Spur Orange County Market
According to the OC Register article dated August 15, 2010,“Rent Cuts Inject Life into Market”, Erika Chavez reports that the Orange County commercial real estate market has been hit hard especially for the first two quarters of 2010. Office vacancy rates have increased from 18.2% from the 1st quarter to 18.4% in the 2nd quarter.
Businesses aggressively signed leases for a reported additional 200,000 square feet causing these elevated vacancy rates for the 2nd quarter. Last year, the average asking rent was estimated at $2.30 per square foot whereas today, it falls right at $2.06 per square foot. Despite the heavy economical blow, the Orange County rental market has seen a glimpse of hope on the horizon.
Landlords are now offering extensive cuts on rent just to entice a steady stream of customers. Businesses are taking advantage of these rent cuts and seeing the potential opportunity for growth and expansion while it is still affordable.
Office Vacancy Rates Remain High Nationwide
Even though renters are eager, the nationwide vacancy rate rose 3.4 percentage points in the last year. Orange County is 4th in the category of most aggressive rent cuts. Leading the nation in rent cuts for the year is Phoenix up 4.2 percentage points, Palm Beach, FL, up 4 percentage points, and Fairfield, Conn, up 3.5 percentage points. Reports have stated that in Orange County office rents have fallen by 1.5% between the 1st and 2nd quarters of this year. These OC cuts are the most drastic by big landlords amongst the 82 nationwide markets surveyed. After 2nd quarter reports came in, Orange County had 20.7% of vacant office space.
On a nationwide scale, these astronomical vacancies have risen for a 10th consecutive quarter which has not been seen by our country for over 17 years. It is going to take a while to see any changes in this bleak market. Landlords are hoping to entice renters with discounted rent rates; however, it will take a lot more than discounted rate to turn the Orange County commercial market around.
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For assistance with Commercial Real Estate — investment sales, asset management, commercial REO, commercial BOV’s, commercial broker price opinion. Contact Michael Duhs, Managing Director of East West Commercial at Michael.Duhs@EastWestCommercial.com or http://www.EastWestCommercial.com or (949) 939-8352.
