The low-rise market, which accounts for 53% of the Orange County office base, is made up of office and flex buildings that are one, two or three stories. The second quarter saw another 665,360 square feet of low-rise office completions. All of the new low-rise projects that were added to the market in the second quarter were concentrated in South Orange County in the cities of Aliso Viejo, Lake Forest, San Juan Capistrano and the Irvine Spectrum. Low-rise development accounts for nearly 88% of the current construction activity in the Orange County office market. More than 3.7 million square feet are under construction in the Airport Area and South Orange County.
Low-rise office space has the lowest average asking lease rate of the office products in the market. By the end of the second quarter, the average asking rent for low-rise space rose to $1.92, a quarterly increase of 3 cents, and a yearly increase of 17 cents. The Airport Area and South Orange County submarkets, which combined offer 67% of the vacant low-rise space in the county, have asking rents in excess of the county average, at $2.06 and $2.19, respectively.
Low-rise office space continues to attract tenants looking for lower-cost alternatives in Orange County. In the first half of this year, more than 1.2 million square feet had been absorbed in the low-rise sector of the office market. The second quarter alone saw 678,260 square feet of net absorption, 426,152 square feet of that in the South County market. However, due to the large volume of first-generation space added to the market in the second quarter, the vacancy rate for low-rise space rose slightly to 9.22%, from 9.16% the previous quarter. In the second quarter of 1999, the vacancy rate for low-rise space stood at 9.88%. Although South Orange County absorbed the most low-rise space in the second quarter, it also saw the largest vacancy increase, of nearly 18%, due to its high volume of new construction. Still, the new space is expected to lease quickly due to high demand in the Orange County office market.
