The South Orange County office market performed well in the second quarter, recording 152,559 square feet of positive net absorption. That compared to 68,560 square feet of positive net absorption in the first quarter. The increase in activity resulted in the vacancy rate dropping 6.3% quarter-over-quarter to end the second quarter at 8.9%.
Spectrum
The Irvine Spectrum submarket was the strongest area of the market, generating 160,990 square feet of positive net absorption during the quarter and driving down the vacancy rate to 3.9% in the submarket. The Spectrum also had one of the highest average asking lease rates in Orange County, posting $2.38 per square foot at the end of the quarter. Overall, the average asking lease rate in South OC ended the quarter at $2.13 per square foot, an increase of 8.1% year-over-year.
The South Orange County industrial market is made up of manufacturing and warehouse buildings and research and development buildings. The density of R&D buildings typically helps the sector perform well.
The R&D sector recorded 90,762 square feet of positive net absorption at the end of the quarter.
The increased occupancy brought down the vacancy rate to 4.4%, a 13.7% drop from the first quarter.
The M&W sector recorded 90,433 square feet of negative net absorption, resulting in a 14% increase in vacancy, which stood at 3.9% at the end of the quarter. Combined, the overall vacancy rate in South Orange County ended the quarter at 4.1%, consistent with the first quarter.
Asking Lease Rate
The average asking lease rate for the M&W sector increased 2 cents from the first quarter to 70 cents per square foot, and the R&D sector remained unchanged at 98 cents per square foot. That brought the overall average asking lease rate to 82 cents per square foot, a 2.3% drop from the second quarter of 2013. The uptick in demand and falling vacancy, however, promise increased lease rates over the next 12 months.
Research and analysis provided by CBRE Research
