An ominous sign for the Southern California commercial real estate market – and for the economy in general – is the report this week that office construction in Orange County, California, plunged 90.8 percent in the second quarter of 2008 from last year’s figures.
“The total space under construction in Orange County at the end of the second quarter is 325,276 square feet,” said Jerry Holdner, vice president of market research for Voit Commercial Brokerage. “The total amount of construction is 90 percent lower than what was under construction at the same time last year.”
A drive down the 405 Freeway in Irvine shows dozens of stalled high-rise office construction projects.
Perhaps another indicator of the bust in office construction are the recent closings of several high-end restaurants in the Irvine Spectrum, which had relied substantially on business lunches.
The slowdown in new office construction in Orange County means that more jobs will be lost in the building sector, and indicates that few companies plan to expand, or move to, this affluent and still high-priced Southern California county, which had served as the epicenter of the subprime mortgage industry.
On the other hand, the lack of new construction will likely mean that the vacancy rate for Orange County offices, which has been climbing steadily, will come down.
The vacancy rate is at 14.46 percent this quarter, which is significantly higher than the 8.95 percent vacancy rate recorded in the second quarter of 2007.