Activity in the low-rise office sector picked up in the fourth quarter, as the overall market recorded 47,341 square feet of positive net absorption. That was an improvement over the third quarter’s negative absorption of 32,498 square feet.
Low-rise office buildings account for approximately 55%, or nearly 55.2 million square feet, of Orange County’s office space. There are about 1,540 low-rise office buildings in the county, compared to 124 high-rise and 173 midrise offices.
The Greater Airport Area led the market in absorption during the quarter, with 67,470 square feet. The Central Orange County submarket followed closely behind with 56,896 square feet.
The South Orange County submarket has had an increase in demand, which resulted in 28,454 square feet of positive net absorption during the quarter. The North Orange County and West OC submarkets ended the quarter with negative absorption, at 90,253 square feet and 15,226 square feet, respectively.
The 2013 annual net absorption totaled 222,898 square feet, a decrease of nearly 1 million square feet from 2012. The creative-office trend continues to pique the interest of prospective tenants, so the low-rise market will start to see an uptick in activity.
Absorption, though positive, remained minimal, causing the vacancy rate to stay stable from the third quarter at 11.1%. That’s also where it stood at the end of 2012, indicating that activity levels have been relatively stable and that the low-rise market has yet to experience a significant amount of demand.
The overall asking lease rate increased, ending the fourth quarter at $1.86 per square foot. Year-over-year, lease rates have increased 4.5% and are projected to continue their upward trend over the next 12 months.
The outlook for the Orange County office market is positive. Market fundamentals should continue to strengthen through increasing job growth, growing tenant demand, and increasing interest in creative-office space. The low-rise and midrise office sectors will especially benefit from any creative-office space demand, because that use typically occurs in those types of buildings.
Data and analysis provided by CBRE Research.
