By AL MASTERS
The high-rise office market in Orange County includes 24.9 million square feet of space in 119 buildings.
About 70 of the buildings, or 59%, are in the airport/coastal submarket. The remaining 49 are in the North, Central, West and South County submarkets.
The third-quarter vacancy rate at high-rise buildings was 8%, up slightly from 7.6% in the second quarter. But the average rental rate continues to increase. The airport/coastal submarket tops the other five OC submarkets with average asking rates at $2.92 per square foot, followed closely by South County at $2.90.
Net absorption of high-rise space for the quarter was a positive 72,054 square feet compared to negative net absorption of 269,578 square feet in the second quarter, due primarily to the recent slowdown in the mortgage industry and the return of space offered for sublease.
There is more than 895,000 square feet of vacant sublease space available in high-rise buildings in the county.
Below market asking rates should attract bargain hunting tenants willing to take “as is” space, as Arbonne International recently did at 3 Park Plaza in Irvine with a 90,000-square-foot sublease from Ameriquest Mortgage Co.
As the supply of existing space continues to be absorbed at less expensive rental rates, the supply and cost of land and construction continues to drive asking rental rates to the highest rates seen in OC since the 2000-2001 boom period.
The average rental rate in OC for the third quarter is $2.71 per month, full service gross, representing an increase of 9 cents from the second quarter and 26 cents from the $2.45 average rate for the third quarter of 2005.
High-rise construction is active in the John Wayne Airport and Irvine Spectrum submarkets with six buildings under construction. When complete, the buildings are set to add more than 55 full floors with 1.7 million square feet of space. All the buildings are set to open between mid 2007 and 2008.
With an unemployment rate of 3.6%,below that of California’s 4.9%,and continued employment growth in the professional and services sectors, the outlook for continued strong absorption of office space in the fourth quarter and into 2007 remains positive.
Masters is a first vice president in the Newport Beach office of CB Richard Ellis.
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