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Office Vacancy Rates for Two SoCal Counties

by Calculated Risk on 4/13/2022 02:05:00 PM

Voit released their Q1 CRE reports today. These reports are for several cities in the west (these are for several categories of CRE – offices, retail, industrial). There is plenty of detail for those interested in Commercial Real Estate.

Overall vacancy rates are not that much higher than prior to the pandemic and asking lease rates have continued to increase.

The following graphs show vacancy rate and lease rates for offices in Orange County and San Diego.

Click on graph for larger image.

The first graph is from Voit for Orange County (not labeled). From Voit:

The office market really suffered during the worst of the pandemic, as the
initial lockdown essentially shut it down in Q2 of 2020 and the majority of office workers
scrambled to adapt to technologies that allowed them to work from home. Ongoing safety
protocols made it is especially difficult for building owners and office-centric business owners
to get people back in the office. Even today, with the worst of the health crisis behind us, less
than half of office workers are back at their desks on a regular basis. High-rise and mid-rise
buildings are facing the biggest challenge because of employee density and dependence on
elevators for access to individual spaces. Add the fact that many businesses are considering
long-term adoption of a work-from-home or hybrid model for their workforces, and it is easy
to see that the office market still has some major challenges to overcome.

After two years of consistent upward pressure on vacancy,
the overall rate in Q1 actually declined by a substantial margin, shedding 55 basis points to
end the period at 13.24%. That’s just 9 basis points higher than it was in Q1 of 2021, further
evidence that the market is stabilizing.

The 2nd graph is for San Diego.

From Voit:

The office market started 2022 on a bright note with leasing in line with historical
norms for the first time since the onset of COVID. Fundamental metrics point towards a healthy
office market in 1Q with positive net absorption, rising rental rates, and a decrease in the
availability rate. The current health of the office market is being buoyed by the rapid expansion
of San Diego’s biotech industry.

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