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Occupancy, Values Fall

Countywide, vacant space now totals 15.6% of the 117.3-million-SF base and the most since the vacancy rate soared to 20% during the last recession. As hybrid work policies become cultural fixtures for many companies, record volumes of sublet space continue to pile up. At the end of Q2, available second-hand space totaled 4.3 million SF, matching the 18% peak of available space reached in the last recession. The hybrid workweek is having a punishing effect on values as reflected in recently recorded sales in the Airport submarket. Blackstone sold its 560,163-SF, 14-story Griffin Towers at Hutton Centre and six-story garage for $82 million – 36% less than the $129 million paid in 2014 for the twin buildings near the 55 and 405 freeways. The buildings were 88.9% and 62.9% leased. Cress Capital of Newport Beach sold its two eight-story Sandpointe buildings totaling 317,061 SF for $36.3 million, 31% less than when purchased in 2017. The buildings were 68.2% and 59.5% leased.

Market Forecast

Orange County job growth will be flat this year and consumer spending will be up 3% -- far less than the annual double-digit pandemic spending, said Chapman University’s Jim Doti in his mid-year economic forecast. Cal State Fullerton economist Anil Puri recently predicted a “garden-variety recession” later this year.