Orange County companies are ditching offices faster than they can rent them, sending the vacancy rate to a historic high of 25 percent.
Firms inked deals for 1.5 million square feet in OC office leases in the second quarter, while vacancies ticked up 1.6 percent to roughly one in four empty offices, the Orange County Business Journal reported, citing Savills.
“Despite the increase in leasing activity, macroeconomic concerns such as recession fears, increasing interest rates, and a slowdown in hiring have caused occupiers to have a wait-and-see approach, which has led to a slowdown in office space demand,” the Savills report said.
“This has also led to many tenants downsizing square footages and/or subleasing their existing office space.”
The rise in leases marked a 39-percent increase to 1.5 million square feet, compared to 1.1 million square feet in the previous quarter.
Of the top 10 deals inked from April to June, just one was a renewal, an improvement for the office market. Six of the top 10 deals in the first quarter were renewals, according to Savills.
Office subleases Orange County also climbed to historic highs, reaching 4 million square feet in June, up 25 percent from 3.2 million square feet last year.
The largest lease inked during the second quarter was by Axonics, which in April moved its headquarters to a 145,500-square-foot office at Sand Canyon Business Center in Irvine.
Empty office square footage across Southern California has shot up 67 percent since the pandemic as more employees work from home. Landlords in Los Angeles, Orange, Riverside and San Bernardino counties had 68 million square feet of empty offices last month, up from 41 million square feet in late 2019.
Los Angeles County added 20.7 million square feet of empty offices since 2019, a 73 percent jump. Orange County added 6.3 million square feet, or 57 percent. And the Inland Empire added 300,000 square feet, or 21 percent, according to an Orange County Register analysis.
The overall office vacancy across Los Angeles County was 26.6 percent in the second quarter, according to Savills, up from 25.1 percent during the same period last year. Much of that comes from subleasing, with nearly 2 million square feet on the sublease market over the last year.
— Dana Bartholomew
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