The high-rise sector led the Orange County office market in bouncing back from a slow first quarter, with high net absorption and increasing asking rents in the second. Proving the strength of the high-rise office sector and the demand for high-quality, high profile space, two brand-new nine-story buildings entered the market in the second quarter 85% pre-leased. The Twin Towers project in South Coast Metro completed construction, adding 410,640 square feet to the base, and contributing 347,319 square feet to the quarter’s positive activity. Total net absorption for the high-rise sector reached 349,372 square feet in the second quarter, a turnaround from the negative absorption of 157,754 square feet in the first quarter. The positive absorption stabilized the vacancy rate for high-rise space in the second quarter, holding it at 12.5%, compared with 12.4% the previous quarter.
Average asking lease rates have continued to increase through the first two quarters of the year, demonstrating the confidence of landlords in the high-rise market. Asking rents moved up another 3 cents in the second quarter, averaging $2.68 per square foot, 22% higher than the second quarter of last year.
As the Orange County office market began to reach the maturation phase of the real estate cycle, construction activity began to taper. However, development of high-rise product advanced in the second quarter with two buildings under construction totaling nearly 480,000 square feet of space. Activity on Phase II of Koll Development Corp.’s 1901 Main project continued in the second quarter, and is expected to wrap up in September. Across the street, in the Irvine Concourse, Opus West Corp. broke ground on Phase II at the Opus Center Irvine project, the only new construction to start during the second quarter. The 14-story, 307,000 square-foot, Class A, high-rise building was 42% pre-leased at the time of the groundbreaking in May, and is scheduled for completion in August.
Information and analysis provided by CB Richard Ellis’ Global Research and Consulting.
