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>> Orange County Market Activity Flattens in Q3 <br />Key Takeaways <br />> The Orange County office market saw a slowdown in <br />demand, recording 91,100 square feet of net absorption. <br />Demand in all submarkets saw a slowdown during third <br />quarter. <br />> Asking rental rates recorded no change from last quarter, <br />remaining at $2.95 per square foot (PSF) full service gross <br />(FSG). <br />> Orange County currently has 502,500 square feet of office <br />product under construction, all of which is expected to be <br />delivered by the end of 2019. <br />> WeWork continued to expand its footprint in Orange County <br />by signing two additional leases in Irvine Spectrum for 116,261 <br />square feet and in the Airport Area for 74,926 square feet. <br />> The Orange County unemployment rate is among the <br />lowest in the nation at 3.0%, down 10 basis points from last <br />year. The largest annual job gains were recorded in leisure <br />and hospitality services (+7,600) while educational and health <br />services (+3,900) recorded the second largest job gain. <br />Orange County Office Market <br />The Orange County office market activity flattened in third <br />quarter as tenant movement slowed while vacancy recorded <br />a decline of just 10 basis points. Despite this slowdown, <br />demand is expected to grow next quarter as WeWork moves <br />into three separate locations. Coworking companies continue <br />to grow their footprint in Orange County. <br />As new inventory delivers to the market at year-end and <br />tenants continue to make space efficient real estate decisions, <br />absorption gains are expected to be limited in the coming <br />quarters. <br />Market Indicators I Relative to Prior Period <br />_ Q3 2019 <br />Forecast <br />Vacancy <br />y— <br />4 <br />Net Absorption <br />y <br />Construction <br />y <br />Rental Rate <br />.� <br />Summary Statistics I Orange County, Q3 2019 <br />Class A <br />Class B <br />All Classes <br />Vacancy Rate <br />17.8% <br />10.3% <br />13.5% <br />Change from Q2'19 <br />(Basis Points) <br />+40 <br />-80 <br />-10 <br />Net Absorption* <br />-253.1 <br />271.3 <br />91.1 <br />Construction Completions* <br />348.8 <br />0 <br />0 <br />Under Construction* <br />0 <br />502.5 <br />502.5 <br />*SF, Thousands <br />Asking Rents I Orange County, Q3 2019 <br />Class A <br />Class B <br />All Classes <br />Average Asking Rent <br />$3.23 <br />$2.71 <br />$2.95 <br />Change from Q2 '19 <br />($) <br />-$0.03 <br />$0.37 <br />$0.00 <br />Y.O.Y. Change (%) <br />1.9% <br />2.3% <br />2.8% <br />Orange County Labor Force I August 2019 <br />Total <br />Prof. & <br />Financial <br />Nonfarm <br />Business <br />Activities <br />- <br />Services <br />12-mo Employment <br />- — <br />- ---- <br />Growth (%) <br />0.8°!0 <br />0.8% <br />0.9% <br />12-mo Actual <br />Employment Change <br />12,500 <br />2.700 <br />1,100' <br />