Hang Nguyen USC study says O.C. vacancies to drop with help from new jobs. Much of the revival in Orange County's office market will come in 2005, a new study says. The USC Lusk Center for Real Estate is forecasting that the county's office vacancy rate, currently 15 percent, will fall to 13 percent by the end of next year because of a 1-percent increase in new jobs. And with local employment boosted by 3 percent in 2005 in mostly the telecommunications, high-tech and business service areas, the vacancy rate will tumble further to less than 10 percent. Due to the higher demand, landlords will be able to ask 10 percent more in rents in 2005, or $2.44 per square foot, compared to today. "2005 should be a real breakout year for Orange County," said Raphael Bostic, director of the forecast. Much of the demand for office leases will be in the John Wayne Airport area, which accounts for about 46 percent of the entire county's office space, according to the report. Greg May, senior vice president of brokerage Transwestern Commercial Services, is seeing demand for the airport market pick up. There's been twice as much leasing near the airport in the third quarter this year compared to all of 2002, according to May. Many of these leases come from firms moving from less expensive offices elsewhere in the county to more costly space near the airport. For example, Epicor Software recently relocated from an office space in southeast Irvine that charged cheaper rent by the square foot to a more expensive one at the Irvine Center Towers. The company made the move for the additional amenities: a five-minute car ride to the airport and closeness to a gym and conference facilities. The industrial market, according to the USC report, won't enjoy as robust of an improvement as the office segment. That's because most of the new jobs are expected to be in industries that occupy office space rather than factories and warehouses, Bostic said. The vacancy rate is expected to fall a half percentage point to 7.75 percent by the end of 2005. -------------------------------------------------------------------------------- CONTACT US: (714) 796-7083 or htnguyen@ocregister.com
December 5, 2003