LOW-RISE OFFICE SPACE
Figures Are Number Rentable Vacant Square Feet Square Feet
for 4th of Square Direct Lease Subleased Absorbed
Quarter 1999 Projects Feet Space Space in Quarter
North Orange County 56 3,441,031 389,666 86,325 -51,981
Central Orange County 85 3,864,182 417,371 29,084 -9,295
West Orange County 23 1,088,280 335,985 26,591 -9,344
Airport/Coastal Area 131 6,299,676 516,609 125,402 151,015
South Orange County 131 7,091,643 840,171 95,962 180,796
Orange County Totals 426 21,784,812 2,499,802 363,364 261,191
AVERAGE ASKING RATES VACANCY RATES
4th Quarter Prior Quarter Last Year 4TH Quarter Prior Quarter Last Year
$1.72 $1.71 $1.38 11.32% 9.81% 7.35%
$1.40 $1.40 $1.28 10.80% 10.56% 8.82%
$1.61 $1.60 $1.52 30.87% 30.01% 26.31%
$1.94 $1.86 $1.61 8.20% 10.08% 6.13%
$2.05 $2.00 $1.82 11.85% 13.62% 6.62%
$1.81 $1.78 $1.61 11.47% 12.27% 8.06%
CHART NOTES:
The OC office market is defined here as 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. 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. Lease rates are per square foot per month, excluding free rent, tenant improvements and other concessions, if any, and weighted by vacant square feet. 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 made up of low-rise buildings with three or fewer stories. At the end of 1999, low-rise office space had the lowest average asking lease rate of the OC office market at $1.81, up 3 cents (2%) from the end of the third quarter. Low-rise average asking lease rates experienced an annual increase of 12.4% from the $1.61 asking rate at the end of 1998. With the rent for mid- and high-rise office space reaching more than $2 per square foot by the end of 1999, the asking rates for low-rise space continue to attract tenants looking for lower-cost alternatives.
The low-rise office market in Orange County experienced more than 261,000 square feet of positive net absorption during the fourth quarter, which brought the total absorption for the year to a positive 525,569 square feet. The positive absorption seen in the final quarter dropped the office vacancy rate for low-rise space to 11.47%, down from 12.27% in the third quarter. Although the vacancy rate decreased during the fourth quarter, it remained higher than the year-end 1998 vacancy rate of 8.06%. The yearly increase can be attributed to the movement of office tenants into flex industrial space (buildings that can accommodate either office or industrial users), coupled with the new low-rise construction added to the office market.
Of the 2 million square feet constructed in the OC office market during 1999, approximately 1.2 million square feet was low-rise space. As of the fourth quarter, more than 1.5 million square feet of low-rise office construction was under way in the county. The majority of that space, 1.1 million square feet, is in the South Orange County market, and another 364,000 square feet are in the Airport Area.
