HEALTHY TENANT GROWTH RETURNED IN Q4
After six straight quarterly losses since the lockdown, countywide demand for space returned in the fourth quarter with positive net absorption across all five county submarkets.
There were 610,486 SF of net absorption in Q4. It was the third strongest quarter since 2015. The healthy end to the year reduced the countywide losses for 2021 to 711,560 SF, an improvement from the 1.3-million-SF contraction in 2020. In contrast to the Covid office downturn, Orange County office tenants shed 4.5 million SF from 2007-2009 following the financial meltdown.
One building was completed in the fourth quarter, a 91,032-SF expansion at shoemaker Vans’ Costa Mesa headquarters. Countywide, seven buildings totaling 1,059,385 SF are underway.
Most tenant growth was in the 22.4-million-SF Central County submarket, which posted 262,055 SF of positive net absorption in Q4 and 269,085 SF for the year. It was the third straight quarter of positive absorption. There are two buildings totaling 206,500 SF under construction.
North County reported net tenant growth of 124,286 SF for 2021. The 14.5-million-SF submarket only had one negative quarter of 4,253 SF in Q2.
South County posted 151,937 SF of fourth-quarter growth but was in the red for the year by 394,281 SF. Four buildings totaling 403,679 SF are under construction.
The Airport submarket, the county’s largest with 43.9 million SF, posted 151,937 SF of growth in Q4. It was the first quarter of growth in the submarket in 18 months and cut the Airport’s losses to negative 677,377 SF for the year. Some 1.2-million SF went back on the market in 2020. One building totaling 449,206 is underway.
Landlords in West County, the smallest submarket surveyed with 128 buildings totaling 9.6 million SF, perhaps have suffered the least in the pandemic. The small submarket reported 23,914 SF of tenant growth in Q4 and demand is off less than 143,000 SF since the lockdown.
Average countywide rents are $2.65 per SF, down 3.3% from the $2.74 per SF peak in Q2 2020. Landlords typically are loathe to discount their published rents in periods of stress, opting instead to offer months of free rent or other off-the-book concessions. In the aftermath of the last recession, landlords were forced to cut asking rents 27% from the $2.60 peak reached in 2007.
Four of the five largest leases in Q4 were for Irvine Company-owned office space. The three largest leases totaled 339,909 SF in buildings in the Irvine Spectrum. Lincoln Property signed a 72,010-SF tenant for its 870,000-SF Flight at Tustin Legacy.
The largest sale of the fourth quarter was Amazon’s $258.82-per-SF cash purchase of a 39-year-old, 637,500-SF office building in Brea from Cerberus. In the Airport submarket, the largest deal was the $64-million purchase of 1301 Dove Street by Ocean West Capital Partners for $297.87 per SF.
Posts
COMMENTS