Orange County’s low-rise office market accounts for roughly 55% of the region’s total office base and consists of 1,547 buildings totaling nearly 55.4 million square feet. To date, this office sector has seen increased vacancy, decreased rents and negative absorption.
In the second quarter, the low-rise office space saw 235,097 square feet of negative absorption, adding to the first quarter’s recorded absorption of negative 71,984 square feet.
The continued negative absorption contributed to the rise in vacancy. As it stands, there is about 7.7 million square feet of vacant low-rise space, which yields an overall vacancy rate of 13.9%. The rate represents an 8% increase from a year earlier yet is below the high- and mid-rise office segments.
Availability
The sector’s availability rate, which includes both occupied and vacant available space, currently stands at 20.4%. While rents have declined across the board for all building types, the average asking lease rate for low-rise space decreased by 7 cents in the second quarter to $2.17 per square foot.
The North County submarket was the most negatively impacted by decreased activity in the second quarter. The vacancy level increased to 14.7% from the first quarter’s rate of 12.7%, and 128,768 square feet of negative absorption was recorded in the second quarter.
The majority of North County’s negative absorption can be attributed to the 105,000 square feet that Fremont General Corp. vacated in Brea. Lease rates also fell last quarter, declining 8 cents to now stand at $2.09 per square foot.
On the other side of the spectrum, West County,which is the smallest low-rise market in the county,saw relatively flat absorption and a slight increase in vacancy with 7,176 square feet of negatively absorbed space and a vacancy rate of 14%. The average asking lease rate for West County remained unchanged in the second quarter at $1.78 per square foot.
During the past two years, there has been some 2.3 million square feet of low-rise buildings constructed and delivered to the market. In 2009, there has only been one building constructed, which totaled 90,000 square feet, and no low-rise buildings are currently under construction.
Looking through the end of 2009, it can be expected that vacancies will continue to rise, rental rates will continue to decline and construction of buildings will remain nonexistent.
Luna is research manager for the Orange County and Inland Empire regions for CB Richard Ellis Group Inc.
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