CHART NOTES:
The OC office market consists of single- and multi-tenant buildings and parks of 30,000 square feet or larger, but excluding government, medical and flex buildings. Rental rates are full-service gross. Availability is for direct lease space only and does not include sublease space. Absorbed square feet do not include pre-leased space. Lease rates are per square foot, per month, excluding free rent, tenant improvements and other concessions, if any, and weighted by vacant square feet. Net absorption is based on traditional office building space only. These figures do not include absorption for flex office space. Due to the migration of office tenants from traditional office space into flex office space, net absorption reported is reduced by the amount of this migration. Historical figures have been adjusted to reflect changes to the base; consequently historical figures reported here may not agree with previously reported figures.
Approximately 38% of the Orange County office base is low-rise buildings, three or fewer stories. Low-rise office space continues to be desirable due to its low cost.
The average asking lease rate for low-rise space during the third quarter was 51 cents lower than the average high-rise rate and 25 cents lower than the county-wide average lease rate for all traditional office space. Asking lease rates on low-rise office space jumped 3 cents in the third quarter, to $1.78 per square foot per month, up from $1.75 per square foot at the end of the second quarter.
The current average asking lease rate for low-rise office space in Orange County is 23 cents (15%) higher than it was in the third quarter of 1998, when the average asking rate was $1.55 per square foot. The highest average asking rents for low-rise space are seen in the Airport Area and South Orange County, which averaged $1.86 and $2.00, respectively, this quarter.
Modest Absorption
Through the third quarter, approximately 262,000 square feet of positive net absorption were reported in the traditional low-rise office market. A current trend in the Orange County office market has traditional office tenants migrating into flex industrial space (buildings which are able to accommodate either office or industrial users). The emigration of tenants from traditional office space to industrial/flex is keeping net absorption at modest levels and influencing traditional office vacancy rates. The office vacancy rate in the county increased to 12.30%, up from 10.81% in the second quarter.
In the past 12 months, approximately 1.8 million square feet of low-rise office space were added to the base. Much of the office construction in the current real estate cycle continued to be in low-rise buildings. Among the dozen new low-rise projects under construction were:
– 5660 Katella Ave. in Cypress, a 48,000-square-foot building, due in August 2000
– 20151 SW Birch St. in Newport Beach, a 22,500-square-foot building, due in December
– 20072 Birch St. in Newport Beach, a 30,000-square-foot building, due in July 2000
– 20362 Acacia St. in Santa Ana, a 45,000-square-foot building, due in June 2000
– 2850 Red Hill Ave. in Santa Ana, a 94,053-square-foot building, due in February 2000
– Summit South in Aliso Viejo: Bldg. 1, a 53,710-square-foot building; Bldg. 2, a 53,710-square-foot building; Bldg. 3, a 46,626-square-foot building; Bldg. 4, a 46,626-square-foot building; all due in October 2000
– Towne Centre Plaza in Foothill Ranch: #A, a 67,365-square-foot building; #B, a 67,365-square-foot building; #C, a 67,365-square-foot building; all due in January 2000
– Serrano Creek Center in Lake Forest: #A, a 54,200-square-foot building; #B, a 73,420-square-foot building; #C, a 54,200-square-foot building; all due in March 2000
