The Greater Airport Area office market got off to a strong start this year.
The first quarter saw positive net absorption of 403,619 square feet, the highest among all submarkets in Orange County.
Class A space represented the majority of the absorption, ending the quarter with 268,767 square feet.
Demand, Vacancy Rate
The Greater Airport Area, with a base of nearly 47 million square feet, is the largest office market in Orange County and continues to enjoy strong tenant demand. The vacancy rate in the area has been on a downward trend for more than a year and finished the first quarter at 12.7%, down from 15.9% compared with a year earlier.
There are a few companies with plans to downsize, however, and that’s projected to have a negative effect on vacancies and net absorption by year-end.
Lease rates in the Greater Airport Area are doing well compared to other submarkets. The overall asking lease rate remains the highest in OC, at $1.97 per square foot. That’s a slight drop from the $2 per square foot recorded in the first quarter of 2012. The overall asking lease rate for class A space in the Greater Airport Area ended the quarter at $2.11 per square foot.
Lease rates, believed to have dropped as low as they can, are projected to steadily increase throughout the rest of the year, according to CBRE’s Econometric Advisors.
Construction in the office market has significantly slowed in recent years due to the recession. Speculative development isn’t expected to restart until overall market fundamentals prove it to be financially beneficial for developers.
Projects Under Way
Several build-to-suit projects totaling 988,386 square feet are under construction in the Greater Airport Area. They include Hyundai Motor’s 469,000-square-foot headquarters in Fountain Valley and Pacific Investment Management Co.’s 380,000-square-foot building in Newport Beach.
Overall, the outlook for the area’s office market is optimistic. Opportunities remain in the pipeline, and tenant demand is steadily increasing.
Analysis provided by CBRE Research.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
