The high-rise office market in Orange County ended the second quarter with increased demand, resulting in 510,455 square feet of positive net absorption, nearly all of which took place in the Greater Airport Area submarket—508,945 square feet.
Orange County has 125 high-rise office buildings that account for about a quarter of the office space here. More than half—75—are in the airport area.
A significant amount of the net absorption during the quarter was generated by the completion of the new 380,000-square-foot Pacific Investment Management Co. building in Newport Beach.
There was negative net absorption in the first quarter, and the year-to-date absorption totaled 295,782 square feet at the end of the second quarter.
The increased activity resulted in a decreased vacancy rate, which dropped 4.5% from the first quarter to 14.7%.
The South Orange County submarket carried the lowest vacancy rate, ending the quarter at 5.3%. The North OC submarket experienced the largest decline in vacancy year-over-year, dropping from 20.2% a year earlier to 16.5%. The Central OC submarket recorded the largest increase in high-rise vacancy year-over-year, from 17.7% 12 months earlier to 23%.
One of the most significant changes in the second quarter was the uptick in the average asking lease rate, which ended at $2.21 per square foot, 6 cents higher than the previous quarter and 13 cents higher than a year earlier.
The average asking lease rate jumped 20.5% year-over-year in the South Orange County submarket, ending the second quarter at $2.99 per square foot. The Greater Airport Area had a 7.8% increase over a year earlier, ending the quarter at $2.34 per square foot.
The strong level of demand and increased activity are expected to keep average asking lease rates on their upward trend.
Construction
Construction activity remained comparatively low, even as the Orange County office market gained momentum.
The majority of the development that has occurred has been build-to-suit projects. Still under construction at the end of the quarter was the Irvine Company’s building at 520 Newport Center Drive, a top-tier, class A, high-rise building in Newport Center that is expected to boast some of the highest asking rates in Orange County.
Data and analysis provided by CBRE Research
