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Orange County Office Market Report

1st Quarter 2022

Posted In — Market Research | Market Report

MARKET DRIVERS

AFTER REPORTING POSITIVE gains in 4Q 2021, direct net absorption fell back into red, reporting negative 368,385 SF.

LEASING ACTIVITY continued its momentum with over 2.0M SF being leased in the first quarter as landlords remain aggressive with pricing and offer more concessions to capture tenants.

DIRECT ASKING LEASE RATES concluded the quarter at $2.73/SF on a full-service basis. On average, asking rates for Class A sublet space are $0.40-$0.50/SF lower than direct space.

PROLOGIS a real estate investment trust that primarily invests in warehouses, recently purchased Pacific Vista, a five-building office campus in Lake Forest for $96M. Pacific Vista currently has seven long term tenants and Prologis plans to continue operating the campus as a best-in-class office project.

OVER 69.5K SF was delivered to the market in 1Q 2022 with 1.2M SF currently under construction.

ECONOMIC REVIEW

ORANGE COUNTY’S LABOR MARKET declined by 29,100 jobs between December and January.

COUNTYWIDE UNEMPLOYMENT increased to 4.2% as of January 2022. This is up from 3.7% from the prior month and below the state average of 5.5%.

NEAR-TERM OUTLOOK

WITH MANY COMPANIES signaling a return to office in April, the Orange County office market could be set for a recovery in the following quarters. Companies who signed short-term leases in order to assess their real estate needs during the pandemic will begin to act on their long-term strategies. Future rent growth should remain stable as landlords will continue to offer concessions to attract tenants and maintain current rental rates.

SOURCE: COSTAR, EDD, OCBJ

 
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