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Saturday, Aug 13, 2022
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OC’s low-rise vacancy went up in the second quarter

The low-rise office market has been leading construction activity in the Orange County office market for the past five years. In the second quarter, more than 1.1 million square feet of new low-rise office product was delivered to the market, 22% of which was leased upon completion. The majority (84%) of the brand-new low-rise space is concentrated in the Airport Area and South Orange County submarkets. The Central Orange County submarket completed its first low-rise project in three years, the Hutton 17th Street Office Park, adding approximately 57,000 square feet to the low-rise base in Santa Ana. Also completed in the second quarter were two more buildings of the Warland/Cypress Business Center in West Orange County totaling 128,173 square feet.

The addition of unleased first-generation space into the market pushed the second-quarter low-rise vacancy rate up to 12.7% from 10.2% in the first quarter. But demand remained evident: South OC, which accounted for nearly 40% of the new construction, experienced 220,773 square feet of positive absorption activity in the second quarter. The Airport Area experienced negative absorption in the low-rise sector due to a few software company closings and an additional residual movement of Verizon Wireless out of a 65,000 square-foot space to the company’s new campus in South OC.

Despite the negative absorption reflected in the second quarter in the Airport Area, the average asking lease rate for that market hopped up 4 cents per square foot per month in the second quarter, demonstrating the continued confidence of the low-rise market. The overall average asking lease rate for low-rise space ended the second quarter at $2.07 per square foot per month, 8% higher than the second quarter of last year, but down from the first quarter’s $2.11.

Although the market has begun to approach the maturation phase of the real estate cycle, low-rise space remains in demand and moves into the second half of 2001 with another 954,000 square feet under construction, 9% of which is preleased.

Analysis provided by CB Richard Ellis’ Global Research and Consulting.

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