Q2 Absorption Gain; Companies Flock to South County

After a sluggish start early this year, demand for Orange County office space surged in the
second quarter, posting the biggest gain in six quarters. Lease rates continued to climb
in the largest submarkets, keeping the countywide average on pace next year to equal its
all-time high.

Demand intensified in the South County submarket, which is anticipating completion next
year of nearly 1.8 million sq. ft. of Class A high-rise and campus-style buildings.
Countywide, 11 buildings totaling 2.4 million sq. ft. are under construction and ground-up
development costs are reaching $600 per square foot. Ignoring low capitalization rates,
however, investors are piling into well-located office assets, favoring Class B low-rise
campus-style buildings they believe will command upwards of 25% more in rents when
updated as modern “creative” space.

Full Report Available 2Q_2016_Office_Market_Report (OC)