Orange County office sales down from a year ago
Year-to-date office property sales in Southern California’s Orange County market totaled $707 million, falling by 23.1 percent compared to the $919 million sold during the same period in 2016, according to Savills. The supply of institutional-grade assets on the market for sale is limited.
Overall quarterly leasing activity rose from 1.6 million square feet to 1.7 million square feet, but once again fell well short of the market’s long-term historical average of 2.2 million square feet. Deal volume in the four most recent quarters decreased to 8.5 million square feet, below the term average of 8.8 million square feet in the last five years.
Overall availability in Orange County registered its largest increase since first quarter 2015, spiking by 150 basis points from 15.9 percent to 17.4 percent. The class A rate jumped by 90 basis points from 18.6 percent to 19.5 percent and has increased by 150 basis points year-on-year.
And class A average asking rent ticked up by only 0.2 percent from $33.93 to $33.99 per square foot.
Orange County continues to benefit from expansion in a diverse array of sectors, ranging from tech and healthcare, to real estate and general professional business services. Steady hiring has supported steady office space demand, particularly from midsized and larger tenants who are aware that conditions have become progressively tighter in the last several quarters.
There are some signs that leasing may be moderating. Tenants leased less than 2 million square feet during the first and second quarters, the first time that deal volume has failed to reach 2 million square feet two quarters in a row since 2014.
Savills expects Orange County will likely remain a top consideration for tech firms either priced out of markets such as San Francisco or Manhattan or unable to find adequate talent in similar markets. And the second half of 2017 may bring some of the proposed development projects off the shelf. Big blocks of quality space remain very limited and new construction would bring some much-needed relief.