The high-rise office market in Orange County usually performs well, but due to some large move-outs in the North and Central Orange County submarkets, vacancy increased and net absorption fell into the red at the end of the first quarter.
Orange County has 124 high-rise office buildings, which account for about a quarter of its office space. More than half, 74, are in the airport area. The overall vacancy rate increased from 14.6% in the fourth quarter to 15.4% in the first.
Fisker, AT&T
Fisker Automotive vacated 156,135 square feet in Anaheim Hills, and AT&T vacated approximately 200,000 square feet in Anaheim, contributing to the increased vacancy rate.
The first quarter ended with negative 214,673 square feet of net absorption in the high-rise market. Net absorption in the airport area remained positive, however, ending the quarter with 107,015 square feet. Alphaeon occupied nearly 53,000 square feet in Irvine, contributing to the positive absorption.
Average asking lease rates have largely remained flat over the past 12 months. Demand and absorption have remained relatively steady, but lease rates have been trailing.
The average asking lease rate for the high-rise market at the end of the first quarter increased 3 cents from both the fourth quarter and a year earlier to $2.15 per square foot.
Quality high-rise buildings are typically in high demand, and once lease rates start climbing, the high-rise market should have some of the strongest growth. Lease rates are expected to increase nearly 3% in the overall Orange County office market by the end of the year. Lease rates should follow as the market continues to strengthen.
Development
Development remains sparse in the office market.
Newport Beach-based Irvine Company has high-rise development under way in Newport Beach that is expected to be completed this year.
Data and analysis provided by CBRE Research
