The Orange County office market finished 2011 with more positive absorption and signs of stability on asking lease rates.
The full-year picture indicates a slow and steady recovery for the office market countywide. The fourth quarter saw about 593,000 square feet of positive net absorption in the fourth quarter, the seventh-consecutive quarter period of such gains.
The office market recorded about 1.9 million square feet of positive net absorption for the year.
Class A office buildings in the Greater Airport Area and Central OC submarkets accounted for most of the activity, demonstrating the continued trend tenants moving up in the market.
Absorption in the Greater Airport Area accounted for the most activity with approximately 371,599 square feet of space. Central and South OC combined to absorb 421,452 square feet. West and North OC saw negative absorption during the fourth quarter.
Outperformers
Class A high-rise properties outperformed the balance of the market with 412,778 square feet of positive net absorption.
The total OC vacancy rate decreased to 15.3% in the fourth quarter from 17.1% a year earlier. The Greater Airport Area had the largest drop of all submarkets.
Vacancies in Class A properties dropped to 17.1%, while Class B fell to 13.6%. Class C properties saw an increase to 14.6% in the fourth quarter.
Asking lease rates seem to have stabilized, remaining at $1.94 per square foot in the fourth quarter compared to the prior period. The even performance halted a 15-quarter streak of declines for the average, a downward run that started in 2007, when the rate reached $2.78.
Construction activity received a boost during the fourth quarter from Irvine Company’s new 380,000-square-foot built-to-suit office tower for investment manager Pacific Investment Management Co. in Newport Center. Construction began in November and is slated for completion in late 2013.
A pre-leased 198,000 square-foot office project for Extron Electronics in Anaheim was completed in the fourth quarter, wrapping up a project that had been under construction since spring of 2010.
The total availability rate in the OC market dropped off to 20.8%. All areas saw declining availability rates except for West OC, which increase to 22.5%.
Availability rates dropped across the board by class.
