For tenants, this slower sector correction and still attractive rents will make for great opportunities in this area in 2012. The competitive rental rates are not expected to tick up by much, but will probably stabilize after hitting bottom in select submarkets. They will offer a wide choice of options for relocating tenants. Concessions will remain generous to secure the best tenants in the market. Over the short term, the Orange County office outlook will remain a tenant’s market.
The average overall full-service gross (FSG) asking rent in Orange County during 2011 was $1.95, dropping from near $2 the previous year. The trend of Class B users jumping to attractively priced Class A product will continue in the first half of 2012. This effort to reduce expenses, while landing better operational locations, will still be very popular. Expect to see some tenants that were on the sidelines in 2011 now ready to make a move. These national and regional occupiers are sophisticated and will be looking for experts with the talent and expertise to focus on their specific needs and their unique corporate expansion requirements/considerations. However, even with slightly increased activity, the pace of demand will appear low by historical standards.
One of largest deals at year-end 2011 was by CoreLogic in Irvine, which leased 169,287 square feet that was previously occupied by the FDIC. Hyundai also leased 147,700 square feet; Western Digital completed a 104,000-square-foot expansion; and Mircrosemi locked in 109,984 square feet. On the sale side, Bella Terra, a 428,806-square-foot, mixed-use office/retail project in Huntington Beach, was purchased in a distressed transaction for $76 million by Lincoln Property Company.
— Patrick L. Murphy is managing principal of CresaPartners' Newport Beach, Calif., office.