High-Rise Office Market
Approximately 29% of the Orange County Office market is made up of high-rise projects, buildings seven stories or greater. The high-rise sector of the market prospered in the second quarter, with increased absorption and lowered vacancy rates. Net absorption reached 297,641 square feet in the second quarter, bringing the total year-to-date absorption for high-rise product to 448,406 square feet. The Greater Airport area, which holds the largest concentration of high-rise buildings in Orange County, experienced positive absorption of 242,520 square feet in the second quarter, the majority of the total absorption for the county.
The increased activity in the second quarter dropped the vacancy rate for high-rise buildings below 10%. The vacancy rate in the high-rise market was reduced to 9.31% in the second quarter, down from 10.57% in the first quarter. Vacancy stood at 10.75% in the second quarter of last year.
The average asking lease rate for high-rise space throughout the county ended the second quarter at $2.19 per square foot per month. Although lease rates are rising in the county, the weighted average is a decrease in average asking rents. As the newer, more desirable high-rise space is being absorbed in the county, the older, lower-priced spaces remain vacant, skewing the statistical average. The current average asking lease rate for Orange County is 34 cents higher than the average asking lease rate in the second quarter of 1999.
High-rise projects make up only about 15% of the current construction activity in the Orange County office market. No new high-rise construction broke ground in the second quarter. However, the two projects that broke ground in the previous two quarters remain under construction: Lakeshore Towers II, which will add another 230,000 square feet to the market in Irvine and the Twin Towers buildings in Santa Ana totaling approximately 414,000 square feet. Future construction planned in the high-rise sector is concentrated in the Central Orange and the Greater Airport Areas and would add 6.1 million square feet to the market if constructed.
