The Orange County office market in 2004 improved from a year earlier.
The size of Orange County’s office market grew to about 91.6 million square feet. Strong demand by new and expanding companies continued in the fourth quarter, producing more than 795,000 square feet of positive net absorption.
Growing demand reduced the amount of available space to 13.8% and the vacancy rate to 10.6% in the quarter.
Meanwhile, Orange County’s average office market lease rate rose six pennies to $2.05 per square foot in the fourth quarter,that’s 4.1% higher than a year earlier though still down 3.4% in the past 5 years.
The development of new space remains moderate, with one building totaling 13,261 square feet finishing construction in the quarter. In all there was 693,600 square feet of newly constructed office space last year.
The modest construction is due partially to the lack potential office sites. Many are being used for mixed-used and residential developments.
Net Absorption
The fourth quarter produced 795,846 million square feet of positive net absorption for a total of 3.3 million square feet of positive net absorption in 2004. That beats the 2.8 million square feet of positive net absorption in 2003. About 42% of total net absorption in the fourth quarter took place in the greater John Wayne Airport area.
Low-rise office space produced 578,067 square feet of positive net absorption.
Vacancy
Orange County office vacancy rates ended the fourth quarter at 10.6%. That’s down 7.8% from the previous quarter and a dramatic 22.6% decline from a year ago.
West County posted a 25% decrease in vacancy from the third quarter, leading the market areas.
Despite this decline, North County and Central County remained the tightest markets in the county at 7% and 9.3%, respectively.
Lease Rates
Average asking lease rates rose six cents in the fourth quarter to $2.05 per square foot. The growth in lease rates is quite unusual compared to the slowly rising asking rents recorded at the beginning of the year.
The greater John Wayne Airport area recorded the quarter’s highest lease rate at $2.20 per square foot, while the North Orange County market trails by 51 cents at $1.69 per square foot. Class A office space leads Orange County with an average asking rate of $2.28 per square foot.
Construction
The Orange County office market added one 13,261-square-foot building in the fourth quarter.
Three office developments broke ground in the fourth quarter, resulting in eight office projects for a total of 616,510 square feet under construction.
