Market Reportdaumcommercial.com/wp-content/uploads/2020/...•Sales: The median price PSF in Q2 was $436.91. Volume in Q2 was down 11.7%. Sales in the South County market accounted

/////////////////////////////////////////

///////////////Los Angeles/////////////

/////////////////////////////////////////

///////////Orange County ///////////

/////////////////////////////////////////

////////////Ventura /////////////////

/////////////////////////////////////////

////////// In land Empi re ////////////

/////////////////////////////////////////

/ ////////////Phoenix/////////////////

///////////////////////////////////////// Although all information is furnished regarding for sale, rental or financing is from sources deemed reliable, such information has

not been verified and no express representation is made nor is any to be implied as to the accuracy thereof, and it is submitted

subject to errors, omissions, changes of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice.

www.daumcommercial.com | O N C O R I N T E R N A T I O N A L

Q2 | 2020

Market Report ///////// Orange County Office

KEY TAKE AWAYS MARKET ACTIVITY ECONOMIC OUTLOOK

Direct Vacancy

D

Net Absorption

Overall Vacancy

V

Gross Absorption

Under Construction

Sale Price Change

Rental Rates (FSG)

Deal Volume

U.S. Employment U6 Rate

Interest Rate Changing GDP

Port Traffic Y/Y Δ NYSE Performance

Inflation Change 10 Yr. - 2 Yr. Spread

MARKET

REPORT

EXPERIENCE IN A CHANGING MARKET

@DAUMCOMMERCIAL /////////////////////////////////////////

Although all information is furnished regarding for sale, rental or financing is from sources deemed reliable, such information has not been verified and no express representation is made nor is any to be

implied as to the accuracy thereof, and it is submitted subject to errors, omissions, changes of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice.


12.6% -228,462 SF

13.4% 1,259,685 SF

1,541,209 SF

35.0%

$2.80

11.7%

Q2

Office 2020 Orange County

MARKET

• Vacancy Rate: Increased by 30 BPS from revised Q1.

• Net Absorption: Fell by over 247K SF from Q1 into

negative territory.

• Office Supply: Over 1.5M SF is now under

construction.

• Sales: The median price PSF in Q2 was $436.91.

Volume in Q2 was down 11.7%. Sales in the South

County market accounted for 84% of the total

volume in Q2.

• Asking Rents: Saw an increase of $0.06 PSF.

ECONOMIC OUTLOOK

• GDP: Q2 is expected to be the worst quarter in

history with an estimated decline of over 35% from

Q1 due to the unprecedented economic

shutdowns from COVID-19. The NBER has declared

the U.S. is in a recession that started in February.

• Employment: Over 47M Americans have filed for

unemployment since economic shutdowns began

14 weeks ago in order to combat COVID-19.

• Economic Relief : As part of the larger $2.2 Trillion

CARES, Congress appropriated $659B for the

Paycheck Protection Program (PPP) to provide

forgivable loans to small businesses. As of 6/29, over

4.8M loans have been approved. The efficacy of

this program is paramount for the U.S. & CRE.

13.3% 21.2%

3.1% (30 year fixed) -35.3%

-12.6% 22.8%

0.2% 50 BPS

Ora

ng

e C

ou

nty

| O

ffic

e /

/// Q

2 2

02

0

///////// Market Report

Although all information is furnished regarding for sale, rental or financing is from sources deemed reliable, such information has not been verified and no

express representation is made nor is any to be implied as to the accuracy thereof, and it is submitted subject to errors, omissions, changes of price, rental

or other conditions, prior sale, lease or financing, or withdrawal without notice.


Q2

OVERALL VACANCY

INCREASED BY 30 BPS FROM REVISED Q1

GROSS ABORPTION

DROPPED BY 23.7% FROM Q1 TO LOWEST LEVEL ON RECORD

NET ABSORPTION

FELL BY 247K SF FROM Q1 INTO NEGATIVE LEVELS

ASKING RENTS

INCREASED BY $0.06 PSF IN Q2 TO $2.80 PSF

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Direct Vacancy Total Vacancy Historical Average

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

(2,000,000)

(1,500,000)

(1,000,000)

(500,000)

0

500,000

1,000,000

1,500,000

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Net Absorption SF Direct Overall Vacancy

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Gross Absorption SF Total Historical Average

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

$0.20

$0.70

$1.20

$1.70

$2.20

$2.70

$3.20

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Office Gross Rent Direct Overall Vacancy

Ora

ng

e C

ou

nty

| O

ffic

e /

/// Q

2 2

02

0






CONSTRUCTION ACTIVITY

INCREASED TO OVER 1.5M SF IN Q2

LEASING ACTIVITY

SHARP DECLINE OF 42% FROM Q1 TOTALING JUST OVER 1M SF.

SALES

VOLUME FELL 11.7%. MEDIAN PRICE PSF FOR Q2 WAS $436.91

Q2

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Leasing Activity SF Direct Leasing Activity SF Sublet

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

Under Construction SF

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$400.00

$450.00

$500.00

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

200

12

00

22

00

32

00

42

00

52

00

62

00

72

00

82

00

92

01

02

01

12

01

22

01

32

01

42

01

52

01

62

01

72

01

82

01

92

02

0

Sales Volume Med. Price PSF

Linear (Med. Price PSF)

Ora

ng

e C

ou

nty

| O

ffic

e /

/// Q

2 2

02

0






VACANCY BREAKDOWN SQUARE FOOT BREAKDOWN– 87,474,108 SF MARKET SIZE

VOLUME BREAKDOWN AVERAGE RENT PSF

Q2

42%

20%

10%

22%

6%

Airport

Central County

North County

South County

West County

12.50%

14.54%

11.13%

12.08%

10.97%

13.62%

15.12%

11.62%

12.61%

11.54%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

Airport Central

County

North

County

South

County

West

County

Direct Vacancy Rate Overall Vacancy Rate

$3.04

$2.50$2.29

$3.14

$2.36

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

Airport Central

County

North

County

South

County

West County

Average Office Rent FSG

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

$0.00

$50,000,000.00

$100,000,000.00

$150,000,000.00

$200,000,000.00

$250,000,000.00

Airport Central

County

North

County

South

County

West

County

Sales Volume Price PSF

Ora

ng

e C

ou

nty

| O

ffic

e /

/// Q

2 2

02

0






METHODOLOGY

& TERMINOLOGY

Methodology

Non-Owner occupied, multi-

tenant office buildings that are

30,000 square feet & greater.

Direct Vacant SF

Space that is vacant and ready

for occupancy by a user. The

space is being offered for lease

or sale directly from the landlord.

Total Vacant W/ Sublet SF

Space that is vacant and ready

for occupancy by a user. The

space is being offered for lease

or sale by the landlord or for

sublease by the current tenant.

Direct Vacancy Rate

Total vacant direct space

(vacant space for lease or sale

from the landlord or owner)

divided by the total rentable

square footage for existing

buildings only.

Vacancy W/ Sublet Rate

Total vacant direct space and

sublease space divided by the

total rentable square footage for

existing buildings only.

Gross Absorption

The total change in occupied

space over a given period of

time, counting space that is

occupied but not space that is

vacated by tenants. Gross

absorption differs from leasing

activity, which is the sum of all

space leased over a certain

period of time.

Net Absorption

The net change in occupied

space over a given period of

time, calculated by summing

all the positive changes in

occupancy (move ins) and

subtracting all the negative

changes in occupancy

(move outs).

Under Construction

Planned buildings for which

construction has started but

have not yet been granted

a Certificate of Occupancy.

Planned buildings are

not included.

Completed in 2020

New buildings with original

construction completed in

the year 2020 and granted

a Certificate of Occupancy.

Renovated buildings are

not included

LOS ANGELES, CALIFORNIA

801 S. Figueroa Street, Suite 600

Los Angeles, CA 90017 213-626-9101

LOS ANGELES NORTH, CALIFORNIA

21820 Burbank Boulevard, Suite 201

Woodland Hills, CA 91367

818-887-3600

SANTA CLARITA VALLEY, CALIFORNIA

28494 Westinghouse Place, Suite 312

Valencia, CA 91355

661-705-2299

SAN GABRIEL VALLEY, CALIFORNIA

13181 Crossroads Pkwy. N, Suite 100

City of Industry, CA 91746 562-695-7244

SOUTH BAY, CALIFORNIA

1025 W. 190th Street, Suite 420

Gardena, CA 90248

310-538-6700

MID-COUNTIES, CALIFORNIA

13810 Cerritos Corporate Drive, Suite C

Cerritos, CA 90703

562-207-3300

ORANGE COUNTY, CALIFORNIA

4400 MacArthur

Boulevard, Suite 950 Newport Beach, CA 92660

949-724-1900

VENTURA & SANTA BARBARA, CALIFORNIA

751 Daily Drive, Suite 105 Camarillo, CA 93010

805-987-8866

INLAND EMPIRE, CALIFORNIA

3595 E. Inland Empire Boulevard, Bldg. 5

Ontario, CA 91764

909-980-1234

PHOENIX ARIZONA

1702 E. Highland Avenue, Suite 120

Phoenix, AZ 85016

602-957-7300

DAUM OFFICES

Q2

/////////////////////////////////////////

///////////////Los Angeles/////////////

/////////////////////////////////////////

///////////Orange County ///////////

/////////////////////////////////////////

////////////Ventura /////////////////

/////////////////////////////////////////

////////// In land Empi re ////////////

/////////////////////////////////////////

/ ////////////Phoenix/////////////////

///////////////////////////////////////// Although all information is furnished regarding for sale, rental or financing is from sources deemed reliable, such information has

not been verified and no express representation is made nor is any to be implied as to the accuracy thereof, and it is submitted

subject to errors, omissions, changes of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice.


Economic Overview

///////// Q2 2020

Na

tio

na

l E

co

no

mic

Ov

erv

iew

//// Q

2 2

02

0






PORT ACTIVITY FELL BY 17.1% FROM Q3. DECLINE EXPECTED IN Q2-20 GDP IN Q1 FINISHED AT -5.0%. Q2 EST. TO BE WORST IN HISTORY

THE IMPACT FROM COVID-19 BEGINS TO SHOW

Q2

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Real GDP Average Real GDP

*-35.3% for 2Q20 based on CNBC/Moody’s Analytics Rapid Update Survey

LEISURE & HOSPITALITY HIT HARD DUE TO SHUTDOWNS FROM COVID-19

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

'20'19'18'17'16'15'14'13'12'11'10'09

Imports Exports Empties

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Recession U6 Rate Official Rate

-82

-596

-1,145

-373

-2,003

-582

-6

-316

-249

-2,156

-2,344

-7,043

-1,091

-1,565

-8,000 -6,000 -4,000 -2,000 0

Government

Other Services

Leisure and Hospitality

Education and Health Services

Professional and Business Services

Financial Activities

Information

Utilities

Transportation and Warehousing

Retail Trade

Wholesale Trade

Manufacturing

Construction

Mining and Logging

Na

tio

na

l E

co

no

mic

Ov

erv

iew

//// Q

2 2

02

0






10-2 YEAR BOND SPREAD INCREASED AS NEAR-TERM PROSPERITY DECLINES THE STOCK MARKET HAD ITS BEST QUARTER IN OVER 20 YEARS

CPI FELL DRASTICALLY IN Q2 THE FEDERAL RESERVE CUT THE FED FUNDS RATE TO 0.0-0.25%

Q2

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Recession CPI All Item

Less Food & Energy Fed Inflation Target

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17'18'19'20

Recessions 10-Yr Treasury Rates

Federal Funds Rate 30-Yr. Fixed Rate Mortgage

-150%

-100%

-50%

0%

50%

100%

150%

200%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

Recession DOW Jones S&P 500 NASDAQ

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17'18'19'20

Recession Bond Spread

Documents

Market Reportdaumcommercial.com/wp-content/uploads/2020/...•Sales: The median price PSF in Q2 was $436.91. Volume in Q2 was down 11.7%. Sales in the South County market accounted