Landlords Likely to Stay with Concessions to Remain Competitive

Orange County’s office market is in recovery mode, as businesses warily return to the office after more than a year of pandemic-induced disruptions. Uncertain demand, elevated vacancy and completed construction motivated landlords to cut rent to retain and attract tenants. The average asking rent for office space declined 2.5 percent year-over-year, according to a report by NAI Capital.

After increasing each quarter since third quarter 2020, vacancy experienced a 10 bps decline from the prior quarter to 12.1 percent. Unused office space is incrementally getting worked out of the market, as work from home and space utilization strategies continue to play out.

Landlords are expected to continue to use concession packages as part of the effort to remain competitive. Third quarter stats showed the shift taking place in the largest submarkets, says NAI Capital.