Orange County’s low-rise office market definitely has recovered.
Third-quarter vacancy rates were off 9.7% from the prior quarter and down 18% from a year earlier, ending the quarter at 12.3%.
Vacancy rates in each submarket declined in the third quarter, with the exception of South Orange County, which was unchanged at 12.4%.
Low-rise space saw nearly 900,000 square feet of positive net absorption in the quarter. This represents a 55% gain from the third quarter of last year and a dramatic 135% rise from the second quarter.
The John Wayne Airport and coastal area accounted for more than half of the total absorption, dropping its vacancy rate from 15% to 13.8%.
So far this year, 1.3 million square feet of low-rise space have been absorbed.
To keep up with demand, developers have been building more low-rise space.
All of the construction in the third quarter,and for the entire year,has been low-rise buildings.
In the third quarter alone, four low-rise office projects totaling 37 buildings and nearly 275,000 square feet finished construction. All but one of these office developments are in the South Orange County market. The other is in Central Orange County.
Lease rates also are seeing the effects of higher demand, ending the quarter at $1.85 per square foot, which is up 2.2% from last year.
Out of the five submarkets, Central Orange County saw the only decline in lease rates, which should regain momentum to keep up with the increased demand.
Countywide, rates range from $1.54 in the Central Orange County market to $1.93 in the airport and coastal area and South Orange County markets.
The popularity of the low-rise buildings is due to reasonable prices and efficient use of space.
As the cost of construction materials has risen, developers have seized on a chance to provide an affordable alternative. Office tenants choosing low-rise space are enjoying attractive amenities and lower average rents.
Data and analysis provided by CB Richard Ellis Group Inc.’s Global Research and Consulting.
