The Greater Airport Area continued to be the most active submarket in the county in the second quarter, accounting for approximately 733,000 square feet of the county’s net absorption.
The area is one of Orange County’s strongest performing office submarkets and consists of 682 buildings totaling approximately 47 million square feet. It recorded strong activity numbers in the second quarter, resulting in the average asking lease rate increasing.
The completion of Pacific Investment Management Co.’s 380,000-square-foot building accounted for the majority of the net absorption in the area. Other notable leases, however, occurred in the submarket. Belkin International Inc. signed a lease for 126,800 square feet, ProConGPS Inc. signed a lease for 65,108 square feet, and HireRight Inc. signed a lease for 40,000 square feet.
The uptick in activity pushed the vacancy rate down, with the quarter ending at 11.3%. That represents a decrease of 7.3% from the previous quarter and a 12.2% drop year-over-year. The Greater Airport Area has the second lowest vacancy rate in Orange County. The drop in vacancy pushed the overall average asking lease rate to $2.13 per square foot at the end of the second quarter. Year-over-year, the lease rate increased 7%.
One of the most significant changes that occurred in the Greater Airport Area was the uptick in the average asking lease rate in Costa Mesa during the quarter. It jumped from below the $2 mark to $2.17 per square foot in a single quarter. That’s likely the result of the high activity in the adjacent Irvine and Newport Beach submarkets.
Institutional owners are likely anticipating strengthening demand caused by the movement of tenants from adjacent cities. The comparable high-quality space offered in the Costa Mesa submarket will probably be the best alternative once Irvine and Newport Beach become oversaturated.
Construction activity remained comparatively low during the quarter, even as the Orange County office market gained momentum. The majority of the development that’s occurred has been build-to-suit projects.
Still under construction at the end of the quarter was the Irvine Company’s building at 520 Newport Center Drive, a top-tier, class A, high-rise building in Newport Center that’s expected to boast some of the highest asking rates in Orange County.
Also being built is the 110,000-square-foot Impac Center in Irvine and a new low-rise building at the Koll Center in Newport Beach.
Analysis provided by CBRE Research
