Office Leasing Shows Signs of Life in Orange County, Still Below Pre-Pandemic Levels
Savills expects concessions to grow as debt obligations prevent office landlords from significantly lowering rents
Office leasing activity improved again in Orange County, Calif., thanks largely to a big lease from a Western-style clothing company, but don’t expect the overall market to follow suit.
There was 1.9 million square feet of office space leased in the third quarter of 2023, compared to 1.5 million in the second quarter and 1.1 million in the first quarter, according to a new report by Savills. Yet demand for office space still lags behind pre-pandemic levels due to macroeconomic concerns, higher inflation and hiring slowdowns.
Those factors also mean that market activity will likely remain slow throughout the rest of the year, as tenants continue to grapple with how to use office space in the age of remote work. Average asking rents are down 3 percent from this time last year, and the same as last quarter at $2.81 per square foot per month.
Savills expects concessions to grow, as debt obligations prevent office landlords from significantly lowering rents.
Total office availability meanwhile decreased 70 basis points, from 24.7 percent last quarter to 24 percent this quarter. Available sublease space decreased 2.5 percent from last quarter.
Western wear outfitters Boot Barn signed the largest new lease this quarter by far, with a 116,261-square-foot space at 17100 Laguna Canyon Road in Irvine. UC Irvine and power supply provider XP Power each signed nearly 27,000-square-foot leases, at 111 Theory Drive and 340 Commerce Drive in Irvine, respectively.
Meanwhile, Fintech company Acorns renewed its 43,900-square-foot lease at 5300 California Avenue, also in Irvine.
Pendulum Property Partners‘ recent sale of One Pacific Plaza in Huntington Beach is otherwise indicative of collapsing office prices in Southern California. The company sold the 394,000-square-foot office park for $42 million, a 66 percent decrease from the $124.5 million it spent to acquire the property less than five years ago.
Nick Trombola can be reached at NTrombola@commercialobserver.com