Orange County Office Market
Vacancy and availability rates – flat relative to last quarter – remain elevated. Total vacancy, for instance, is 17.9%, 320-bps above its five-year average. Office demand is muted, and nothing is presently under construction in the market for the first time since the Global Financial Crisis in 2008. The Irvine Company scrapped plans for a 532,000-SF life science campus at UCI Research Park and will now build a 1,200-unit apartment complex on the 19-acre site instead. 33% of Orange County’s office inventory consists of buildings with sub-80% occupancy. Buildings with lower occupancy thresholds tend to struggle to generate positive NOI, which, in turn, makes it difficult to support debt (assuming debt is present on a given building).Download Orange County Office Market Report 4Q23
Orange County Industrial Market
A steady trickle of tenant departures and downsizes boosted vacancy to a three-year high of 3.0% and inflicted 2.2 MSF in net absorption losses in 2023. Move-outs by Hampton Products (308,000 SF) and Romeo Power (215,000 SF) contributed to net absorption losses in the fourth quarter. Available sublease space totaled 2.4 MSF in the fourth quarter, up 13.8% from three months ago. Future sublet availability will likely fluctuate as tenants continue to reassess space needs. Lease term lengths are trending down as tenants adopt a more cautionary stance. Some may be biding their time as they wait for rents to further decrease. Under-construction activity totals 1.8 MSF; 21.3% has pre-leased to date.
Download Orange County Industrial Market Report 4Q23