The high-rise office market in Orange County ended the first quarter with steady demand, resulting in 402,030 square feet of positive net absorption.
Over half of the net absorption—244,071 square feet—took place in South Orange County, with the addition of 200 Spectrum in Irvine Spectrum. The Greater Airport Area ended the quarter with 142,839 square feet of positive net absorption. The remaining submarkets—North, West and Central Orange—recorded a combined 15,120 square feet of positive net absorption.
The vacancy rate in the high-rise market has been steady; however, it increased 5.5% from the fourth quarter to 11.6%. The vacancy rate was still down by 5.7% from a year earlier.
The West Orange County submarket experienced the largest year-over-year drop in vacancy during the quarter, decreasing 46% from the first quarter of 2015 to 4.8% at the end of this year’s first quarter.
Conversely, the South Orange County submarket experienced the largest increase year-over-year, jumping from 5% in the first quarter of 2015 to 13.3% in the first quarter.
First-quarter asking rates increased 3.8% from the fourth quarter and by over 19% from 12 months earlier. The current average asking rate for the Orange County high-rise market is $2.75 per square foot. The previous low point of $2.08 per square foot was experienced during the third quarter of 2012, and the last peak was $3.17 per square foot back in the fourth quarter of 2007.
There is a still a ways to go in order to reach peak asking rates, though the Orange County office market has shown tremendous growth in rental rates over the past 12 months. The Greater Airport Area held the highest asking rate in the region, ending the first quarter at $2.97 per square foot. The South Orange County submarket followed closely behind, ending the quarter with an asking rate of $2.96 per square foot.
Overall market fundamentals have improved significantly and are showing signs of continuous acceleration. We project that lease rates will continue to grow and that vacancy rates will keep trending downward. Tenant demand remains strong, and the Orange County office market is poised to have a strong year.
Data and analysis provided by CBRE Research
