Construction of commercial office space in Orange County increased markedly during the third quarter of 1987, fueling a rise in vacancy rates and a slight decline in leasing activity, according to a report released Wednesday.
An estimated 7.2 million square feet of office space was under construction during the third quarter, up nearly 2 million square feet from the second quarter, the Newport Beach office of Grubb & Ellis Commercial Brokerage Services said in its report.
An additional 4.8 million square feet of office space has already been approved by planning commissions throughout the county but has yet to begin construction, the report said.
But 8.2 million square feet, or 23% of the county's total available office space, stood vacant during the third quarter, the study said. In contrast, only 6.9 million square feet, or 21%, was empty during the second quarter.
'Healthiest Office Market'
This Orange County market is about the healthiest office market in terms of leasing activity in Southern California," said Keith Karpe, a Grubb & Ellis spokesman. "Its vacancy is a little bit higher (than other areas), but that's not the best indicator of the area's health. The absorption level is."
The absorption level is the amount of square footage newly occupied during a specified period of time and is an indication of leasing activity. According to Karpe, 817,000 square feet were newly occupied during the third quarter and 2.5 million square feet in the first nine months of 1987.
Downtown Los Angeles had a vacancy rate of 14.5% in the third quarter, with an absorption rate of 700,000 square feet for the first three quarters of 1987. In West Los Angeles, the vacancy rate was 12%, while absorption for the nine months was 977,000 square feet.
George S. Spragins, vice president and district manager of the Newport Beach office of Grubb & Ellis, said the high Orange County vacancy rate was caused by the increased number of new office buildings here.
"The market will now adjust itself to these slightly higher vacancies by hopefully increasing its leasing activity over the next 12 months," he said. "It's the usual cycle of build first to anticipate the needs of expansion-minded tenants."
The greater airport area is the biggest office space beneficiary, according to Grubb & Ellis, with 46% of the county's existing office space and 49% of the offices under construction. South Orange County has the least office space, with 6% of the county's existing space and 7% of the space under construction.