With more than 51 million square feet of rentable space, the low-rise office sector accounts for about 55% of office space in Orange County.
Tenants typically lease low-rise space for several reasons: it’s efficient, flexible space with lower asking rents and parking costs compared to high-rise buildings.
The technology crash earlier this decade saw big increases in sublease space available in low-rise buildings. Negative absorption spiked in OC.
But the economic,and technology,rebound during the past few years has boosted demand for low-rise space.
Most of the low-rise office space is concentrated in South County and the area around John Wayne Airport, though there has been some construction in the sector in other areas of OC.
There has been 260,469 square feet of absorption of low-rise space this year. The sector saw a strong first quarter, with negative absorption of 234,651 square feet in the second quarter.
The overall low-rise vacancy rate in the second quarter increased to 6.9%, versus 5.9% in the first quarter.
Three consecutive years of positive absorption helped push the vacancy rate down in OC. The average vacancy rate was 9% a year ago.
Vacancy is highest in North County, which recorded a vacancy rate of 7.8% in the second quarter, up from 6.2% a year ago.
West County had the lowest vacancy rate in the second quarter,5.3%, down from 8.2% a year ago and 6.9% in the first quarter.
Office users looking to buy small buildings have generated a big part of the demand for low-rise space during the past year.
Low interest rates have made it possible for users to lower their effective occupancy costs and own their space, rather than lease.
The average lease rate for low-rise space jumped 25 cents from a year ago to $2.17 per square foot in the first quarter. Lease rates were up 9 cents from the first quarter.
The highest average lease rate for low-rise space was in South County in the second quarter. The area posted a rental rate of $2.35 per square foot.
North County was the only area of OC to see a rental decline from the first quarter, with lease rates off 1 cent to $1.83 per square foot.
Data and analysis provided by CB Richard Ellis Group Inc.’s research unit.
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