Real Estate Watch: High-Rise Office Space
Landlords Vie for High-Rise Tenants
By SIMON DILLON
High-rise office buildings in Orange County are seeing higher vacancy rates than mid- or low-rise buildings. The difference in rental rates between the categories has been compressed. High-rise owners are aggressively pursuing tenants who have many choices, especially among high-rise buildings.
Since there’s more space than tenants, it could turn out to be another year of lower lease rates. The average asking rate for OC’s high-rise space was $2.28 per square foot in the first quarter, down from $2.41 in the year-ago period.
About 65% of OC’s high-rise office space is in the greater John Wayne Airport area, which posted a 19% vacancy rate in the quarter, compared to the county average of 16.1%.
With the increasing supply of available space, rates have been steadily declining in the airport area since 2000. The challenge for landlords is to make their buildings stand out.
Listing brokers must sell all the bells and whistles associated with their projects just to make the “short list.”
Short-listed landlords then have to go head-to-head in competition for significant size and credit tenants.
Now is a great time to be in the market for high-rise office space, especially in the airport area.
Tenants still have to pay a premium for high-rise office space,especially when parking charges are involved. But the premium is much lower than it has been for a long time.
Many low-rise tenants have moved up to better space during the past real estate cycle. That’s expected to happen again in this cycle.
Many high-profile office buildings recently have changed hands: Newport Corporate Tower, 4400 MacArthur, 5000 Birch, 1500 Quail, 555 Anton, Opus Tower, Century Center I & II, 1900 Main and, most recently, Birch Bayview. Others are in escrow or are on the market.
There’s no lack of buyers for these trophy buildings given the amount of capital looking to be placed by investment advisers and real estate investors.
Dillon is a vice president in CB Richard Ellis’ Newport Beach office.
