Real Estate Watch: Airport Area/Central Coast
Lease Rates on Downswing in Airport Area
By SIMON DILLON
It’s a tenants market for office space in the greater John Wayne Airport area
Average asking lease rates fell in all product types in the third quarter vs. a year ago.
Office leasing activity is unusually high, however,November and December normally are slower months.
If these activity levels continue, there could be lower vacancy rates next year and subsequent increases in lease rates.
All submarkets in the airport area have been affected by the economic slowdown.
Even Newport Center (Fashion Island) has lowered its average asking office lease rate to $3.05 per square foot, a significant decline.
The recent move of some of Fashion Island’s larger office tenants has created an atypically high 11.8% vacancy rate in the area.
This, coupled with the upcoming possible move of Stradling Yocca Carlson & Rauth, which occupies five floors in one of The Irvine Company’s Newport Center towers, has prompted price reductions.
Asking rates have been lowered to a point where Newport Center likely will attract office tenants from the John Wayne Airport and South Coast Metro submarkets.
Tenants will still pay a premium for a Fashion Island address, but now the delta may be more palatable.
Elsewhere, vacancy rates are giving tenants many alternatives. The John Wayne Airport area office market has vacancy of 17.6%, with the Irvine Business Complex at 18.7% and South Coast Metro at 18.2%.
The airport area is expected to lead the recovery in Orange County. South Coast Metro and the Irvine Business Complex, with lower average asking lease rates of $2.19 and $1.84, respectively, likely will attract some Central County office tenants.
With market conditions as they are, office tenants can look to upgrade quality and location.
Dillon is a vice president in CB Richard Ellis’ Newport Beach office.
