Activity in Orange County’s low-rise office sector continued its positive momentum in the second quarter, generating 166,503 square feet of positive net absorption. That brought the year-to-date net absorption total to 162,554 square feet.
Low-rise office buildings account for approximately 55%, or nearly 55.2 million square feet, of the county’s office space. There are about 1,540 low-rise office buildings, compared to 124 high-rise and 173 midrise offices.
Submarket Absorptions
The South OC submarket generated the most net absorption, ending the second quarter with 148,020 square feet and followed by the Greater Airport Area, with 121,078 square feet. The North, Central and West OC submarkets ended the quarter with negative net absorption, with a combined 102,595 square feet.
The low-rise office sector in Orange County has become popular for tenants looking for creative-office space. Many obsolete low-rise office buildings are a good option to renovate into such a space.
The vacancy rate, with the increased amount of activity, dropped 1.8% from the first quarter to 10.9%. The Greater Airport Area held the lowest rate, 9.4%, followed by the South Orange County submarket, at 9.6%. The North Orange County submarket recorded the highest vacancy rate, at 16.2%, a significant increase from the 10.3% recorded a year earlier. The average asking lease rate has been pushed upward with the declining vacancy. The lease rate for low-rise office space increased to $1.92 per square foot by the end of the second quarter, 6.1% higher than a year ago and 2.1% than the previous quarter.
The South OC submarket held the highest asking rate, at $2.03 per square foot, mostly due to the Irvine Spectrum, where the average asking rate was $2.20 per square foot for low-rise space at the end of the quarter.
Outlook
The outlook for the Orange County low-rise office market is positive. The market fundamentals should continue to be strengthened by increasing job growth, rising tenant demand, and increasing interest in creative-office space.
Data and analysis provided by CBRE Research
