By BILL MURRELL
More than a quarter of Orange County’s office space is in high-rises that are seven stories or higher.
The two primary submarkets for the 26 million square feet of high-rise space in OC are the John Wayne airport area, which includes Newport Center/Fashion Island, and Central County. The airport area has 17.5 million square feet in 74 buildings (65% of total high-rise space), while Central County contains 6.3 million square feet in 35 buildings (23% of
the total).
The remaining three submarkets, South, West and North counties, contain a total of 16 high-rise buildings.
High-rise occupancy has been dropping as a result of relatively weak demand, the subprime givebacks and an abundance of new construction.
Although the second quarter showed negative absorption, the airport area had positive absorption at 67,480 square feet and South County also had absorption at 62,911 square feet.
Of the four class A high-rise buildings completed in the airport area in the past 12 months, all are feeling the effects of the slowdown while showing moderate activity: 2211 Michelson (12 stories, 266,600 square feet, completed in June 2007) is 49% full.
2050 Main (13 stories, 315,000 square
feet, completed in November) is 30% full
and expects another 20% leased by New Year’s Day.
The 19-story building at 3161 Michelson (530,380 square feet) is 32% leased and is said to be close to a lease for the top three floors.
Lastly, 18100 Von Karman (10 stories, 231,000 square feet, completed in October 2007) is 22% full.
In fact, the airport area is one of two submarkets where the vacancy factor decreased in the second quarter from 19.2% to 18.8%. North County also decreased from 4.8% to 4.7%.
Increasing Vacancies
These decreases were counterbalanced by a Central County vacancy factor increase from 16.3% to 18.5%. A major factor here is Ameriquest Corp. giving back 500,000 square feet over the past 12 months. Eighty thousand square feet of this space has been leased.
South County vacancy increased from 29.7% to 39.2%. This largely is due to the completion of 40 Pacifica in June of this year. Ownership of this 14-story building totaling 312,000 square feet is focusing on large multi-floor users and has yet to sign a lease.
Its twin, 20 Pacifica, was completed in November and is 36% full with another 23,000 square feet of leases in the works. In the past 3 months, the vacancy rate for the overall high-rise market increased from 18.3% to 19.3%. The 19.3% number is a 97.3% increase from one year earlier.
Average asking rental rates have decreased from $3.09 per square foot per month to $3.06. The two markets hardest hit were Central and South County. South County declined 23 cents from $3.05 to $2.82 and Central County was down 9 cents from $2.70 to $2.61. Asking rates in North County held even at $2.32 per square foot, while the airport area dropped 3 cents to $3.24 and West County decreased by 2 cents to $2.78 per square foot.
Murrell is a senior vice president in the Newport Beach office of CB Richard Ellis.
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