The largest and fastest-growing sector of height-classified buildings in Orange County, the low-rise market, which includes “flex” space, accounts for more than 50% of the office product here. The low-rise market continued to grow throughout 2000, with the addition of nearly 3.5 million square feet. The fourth quarter alone saw the delivery of 1,024,725 square feet, approximately 90% of that in South Orange County, where projects such as Pacific Vista, Palm Terrace, Discovery Business Center and the new Verizon Wireless complex came on line.
Net absorption of low-rise space remained positive through the fourth quarter. More than 700,000 square feet were absorbed in the quarter, bringing the total net activity for the year to 3,430,262 square feet. The majority of the net absorption took place in South Orange County. Although the South County market experienced the greatest amount of net absorption, the vacancy rate in that area rose to 11% in the fourth quarter, up from 7.9% in the third. The rise in vacancy was due mostly to the addition of 924,578 square feet of new construction that was 52% vacant at the time of completion. As a result, the vacancy rate for the entire OC low-rise market ended the year at 8.8%, up from 8.3% the previous quarter.
The average asking lease rate for low-rise office space continued to increase throughout 2000; however, it remained substantially lower than the county average. By the end of the year, the average asking rent for low-rise space had risen to $2.04 per square foot per month, nearly 13% higher than the average at the end of 1999. The Airport Area and South Orange County have asking rates higher than the county average, at $2.19 and $2.22, respectively, due to the influx of new class A and B low-rise buildings.
Construction of low-rise projects continued strong through the end of the year, with 2.6 million square feet in the development stages. Approximately 50% of the space under construction was scattered throughout South Orange County, with another 40% in the Airport Area, in the cities of Irvine, Newport Beach and Santa Ana.
