The current commercial real estate office market in Orange County, CA is the most challenging economic environment in 40 years, according to a new report from CBRE. An impending recession, record high sublet space availability and the trend to hybrid work, has led to a 12.4% vacancy rate and a net absorption of negative 239,000 square feet in the fourth quarter of 2022.

Sublease availability in Orange County has reached a record high of 4.2-million-square-feet, making up 18.5% of the total available space. Not surprisingly, Q4 lease rates declined, but just slightly from Q3, falling $0.05 to $2.89 FSG per square foot. Landlords continue to provide concessions such as free rent up to 12 months and tenant improvement allowances.

Office investment numbers also decreased substantially in 2022, finishing the year at $310 million, a 65.1% drop from 2021. There is a bright spot, according to CBRE, saying many in the industry are expecting a bounce back in the 2nd half of 2023.