The Orange County office market encompasses approximately 81.6 million square feet of product. The Greater Airport Area continues to dominate the office market by containing nearly half (48%) of the total net rentable area. Central Orange County (19%) and South Orange County (18%) are two other regions whose growth and development are important in the marketplace.
Vacancy Rates
With newly constructed office buildings being quickly absorbed by signed commitments over the past year, the Orange County vacancy rate decreased to 9.49%, down from 9.63% in the first quarter and 9.90% in the second quarter of 1999. The Airport Area, traditionally a tight market in Orange County, had the lowest vacancy rate, just 8.28%. North Orange County and South Orange County showed increases in vacancy for the quarter due to the influx of newly developed office product, which is expected to follow the trend of quick absorption for first-generation space.
Net Absorption
The second quarter generated high activity, the majority of which was apparent in the southern portion of the county. The Greater Airport Area absorbed 565,188 square feet and South Orange County absorbed 513,568 square feet. During the second quarter, the entire county experienced a total of 1,182,075 square feet of positive office net absorption. The low-rise office market, which benefits from tenants seeking lower rates, accounted for more than half (57%) of the positive absorption in the entire OC office market.
Average Asking Lease Rate
As newer construction is being absorbed, older spaces that have lower asking rents are becoming vacant, thus affecting the weighted average. The overall weighted average asking lease rate for office space in Orange County appeared to drop to $2.04 in the second quarter, when in actuality, lease rates are rising in Orange County. A year ago, in the second quarter of 1999, the average asking lease rate for office space in Orange County was $1.98.
Construction
The Orange County office market closed out the first half of 2000 by completing approximately 1.6 million square feet of new office space. The second quarter alone saw delivery of 1,070,050 square feet, better than the 1999 second quarter performance, when 953,254 square feet were delivered. The year will continue to show strong construction activity as approximately 4.2 million square feet of new office space was under construction at the start of 2000, almost all of it in the Airport Area and South Orange County markets.
