Orange County began to see incremental improvements in 2013 after a few years of flat market fundamentals.
These improvements have been carried through the first quarter as absorption and average asking lease rates increased from the end of 2013.
Absorption in the first quarter reached 350,034 square feet, an increase of approximately 464,000 square feet over the negative absorption in the fourth quarter of 2013.
Absorption has been led by the financial, technology, and medical sectors, but other industries have contributed significantly, suggesting a wide-based recovery in the county.
Lease Rates
Orange County lease rates were stagnant in the past few years after falling from historic highs in 2007.
Lease rates began a steady rise during 2013 as core markets such as Newport Center, Irvine Spectrum and the Irvine Business Complex strengthened the market.
The average asking lease rate in the county, after decreasing to $1.91 per square foot in the first quarter of 2013, increased to reach $1.97 per square foot in this year’s first quarter. The latter lease rate is a 2 cent increase over the fourth quarter of 2013 and the highest recorded rate since 2010.
Select submarkets saw even greater growth as tenants and landlords reacted to the low cost of quality office space.
Rent growth is projected to increase at a rate of 4.1% in 2014, according to CBRE Econometric Advisors.
The OC vacancy rate has remained stable, staying within the 12% range since early 2013. The rate stood at 12.4% at the end of the first quarter, unchanged from the previous quarter. The vacancy rate has improved considerably after peaking at 18.1% in 2010.
New construction means that absorption will be needed to maintain or improve the current vacancy rate.
Market activity increased during the first quarter, as many tenants signed sizable leases.
Tenants such as Alphaeon, Oculus, DaVita Healthcare, and BP Law Group added to the positive absorption during the first quarter.
Analysis provided by CBRE Research
