The Greater Airport Area office market had a strong performance in the first quarter. Absorption for the submarket was a positive 715,790 square feet compared to a negative 42,007 square feet in the fourth quarter. Absorption was 482,875 square feet for all of 2013.
Absorption in Orange County has now been positive in 15 of the past 16 quarters, and vacancy stands at 11.9% for direct available space and at 12.2%, including vacant sublease and direct space. That compares to 12.7% for vacant direct and sublease space in the first quarter of 2013.
Notable Leases
Notable leases in the first quarter included Oculus VR, DaVita Healthcare, Alphaeon Corp. and BP Law Group. Most office space absorption was in the technology, healthcare and financial sectors, but other industries also contributed to the market momentum, suggesting a broad-based recovery.
Some buildings are under construction in the Greater Airport market, but their impact on the vacancy rate will be minimal.
Some of those buildings include:
• 520 Newport Center Drive, at 326,000 square feet;
• the new Google building, 110,000 square feet and 100% leased;
• and 4450 MacArthur Blvd., 23,000 square feet and 50% leased.
Average asking lease rates rose to $2.06 per square foot, full service, compared to $2.03 per square foot in the fourth quarter and $1.97 per square foot one year ago, reflecting steady increases in rates and a 4.6% increase over the past year.
Rents will continue to gain momentum through the balance of the year due to increasing leasing coupled with new ownerships that entered the market with higher rent expectations. Rents, after falling from their peak average rate of $2.98 per square foot for all office categories in 2007, still have significant room in which to recover.
Growth of the Orange County and airport average asking leases recently gained momentum: Markets across the country posted consecutive quarters of positive rent growth, which, along with low financing rates and available capital, is driving investor demand and pushing sale prices.
Chandler is a senior vice president at CBRE.
