Orange County’s high-rise office market continued this year’s trend of trickling-downward vacancy rates and asking rents in the third quarter.
Employment, specifically office-using jobs, is the strongest indicator for understanding demand of office real estate; OC has marked an almost 4% increase in office-using jobs year-over-
year, ranking fourth highest among the 20 largest office markets in the U.S.
Office-using job growth generally doesn’t boost rental rates, though Newport Center, Irvine Spectrum and Seal Beach tend to be exceptions to that rule.
The growth of high-rise office tenants—along with an ongoing trend in which tenants are upgrading low-rise class B space to high-rise class A space—led to another drop in overall vacancy rates in high-rise buildings.
Vacancy declined to 15.5% from the previous quarter’s rate of 16%. The average asking rents in the county also fell to $2.08 from $2.11.
Rents have continued on a general downward trend amid a market that seems to be recovering. OC has decreasing vacancy rates, positive office-using job growth, and a lack of speculative new construction—all factors that should lead to rising rents.
The bigger question for landlords and tenants: How long will these trends continue before rents respond?
The high-rise office market has benefited from growth in several concentrated areas, including the healthcare, banking and technology industries. There were several notable high-rise office transactions during the quarter, including Pacific Premier Bank’s lease of 44,000 square feet at 17901 Von Karman Ave. in Irvine. Another notable transaction: Affiliated Doctors of Orange County expanded its
OC presence in a move to 21,000 square feet at 600 City Parkway W. in Orange.
Ellis is a vice president in CBRE Group Inc.’s Newport Beach office.
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