Strong end to 2017 in the Orange County office market
Southern California’s Orange County office market ended the year with more space gains, causing total net absorption to finish at its highest level since 2014, according to Transwestern.
Led by large space gains in the Irvine Spectrum, net absorption in the fourth quarter totaled 249,400 square feet, which brought 2017 total net absorption to end at 990,277 square feet (up 27 percent from 2016). However, 2017 total leasing activity of 9.5 million square feet was a decline of 6 percent from 2016 as many local companies remain focused on “right-sizing” their real estate footprints and using their office space more efficiently.
Total 2017 investment sales totaled $2.9 billion, up 40 percent from 2016, showing a continued interest by investors for the Orange County office market due to its high-quality workforce, quality of life, and relative discount to sky-high valuations currently being seen in adjacent Los Angeles. Approximately $672.2 million of office sales occurred in the fourth quarter 2017.
A total of 554,299 square feet of new office space was delivered to the market in the fourth quarter 2017, while more than 1.4 million square feet is now under construction, of which 42 percent is currently pre-leased.
For 2018, Transwestern expects Orange County office space demand to remain steady, although there could be headwinds for local companies concentrated in certain industries such as semiconductors and medical devices that have recently seen some consolidation.
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