By JOHN DESPER
Despite adding more than 1.4 million square feet of space and the perception of soft demand, the Orange County low-rise office market continues to surge.
Performance largely is influenced by job growth, with an emphasis on employment stability in the mortgage sector.
At 53 million square feet, the low-rise office market has more than twice as much space as the high-rise office market. The low-rise market accounts for 56% of OC’s total 95 million square feet of office space.
The reasons for its popularity are simple,lower occupancy costs, shorter construction, size flexibility and the option to lease or buy.
The vacancy rate of low-rise office space, while up from last year’s 5.9%, remains a healthy 8.2%.
Still, the average asking rent rose by 18% in the first quarter from a year earlier to $2.47 per square foot.
With the John Wayne Airport area and Central County leading the way, the low-rise market rebounded with a strong first quarter of positive square feet absorbed of 474,160 square feet, up from the negative 69,289 net absorption in the fourth quarter.
Building owners of low-rise office space have good reason for long-term optimism as supply and demand fundamentals are in their favor.
While there is more than 1.3 million square feet of low-rise space under construction this year, 1.2 million already is leased.
Given the low-rise market has averaged more than 1.4 million square feet of positive net absorption in the past five years and has a low vacancy rate and limited land for construction, you have a long-term supply and demand scenario that works in favor of building owners.
Desper is a first vice president in the Newport Beach office of CB Richard Ellis Inc.
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