Orange County’s high-rise market ended the fourth quarter with increased demand, resulting in 436,778 square feet of positive net absorption.
Nearly all of the absorption took place in Central Orange County—224,599 square feet—and in the Greater Airport Area—208,297 square feet.
The combined submarkets are home to 111 of OC’s 126 high-rise buildings.
The vacancy rate in the high-rise market steadily fell throughout the year and finished at 14%.
Asking Rates
Asking rates increased just over 5% during 2014, but the county had at least a 15% increase in actual contract lease rates.
The current average asking rate is $2.24 per square foot. The previous low point of $2.08 per square foot came during the third quarter of 2012, and the last peak was $3.17 per square foot in the fourth quarter of 2007.
Investments
Building owners are becoming increasingly confident with their outlooks and are investing significant dollars in project upgrades.
American Realty Advisors strategically invested at three of its high-rise buildings in the airport area. The company, in addition to investing in common area upgrades at Newport Corporate Tower and Von Karman Towers, built out new progressive and creative-speculative suites ranging from 1,000 square feet to 7,500.
American Realty, spurred by leasing demand, started construction on eight progressive-speculative suites on the seventh floor of 18201 Von Karman Ave., a space that was recently vacated by CalFirst Bank.
It is no longer rare to have two customers desiring to lease the same space, especially desirable speculative suites that are ready to go.
Statistics indicate Orange County is at the beginning of the third inning, with a long way to go in regard to rent growth in high-rise buildings.
Expect rates to experience significantly larger gains this year than were recorded in 2014. Rates in high-rise office buildings are poised to increase between 7% and 9% this year and have a long way to go thereafter.
Dillon is a first vice president and senior partner of the Dillon Katz Team at CBRE Newport.
