The high-rise market in Orange County ended the first quarter with increased demand, resulting in 476,089 square feet of positive net absorption, nearly all of which took place in the Greater Airport Area and Central Orange County.
The two submarkets hold 111 of the county’s high-rise buildings, while just 15 are in the other three submarkets combined.
Vacancy, Asking Rates
The vacancy rate in the high-rise market is steadily falling and finished the quarter at 12.3%, representing a decline of 20.3% from a year earlier.
Asking rates increased during the quarter by just over 3% from the fourth quarter and by 7.4% from a year earlier. The Central Orange County submarket had the largest year-over-year drop in vacancy during the quarter, falling more than 32% from the first quarter of 2014. The county government contributed to the positive net absorption and drop in vacancy in Central Orange County, signing a lease for 111,690 square feet at 500 N. State College Blvd. in Orange.
The current average asking rate in the county’s high-rise market is $2.31 per square foot. The previous low point of $2.08 per square foot was seen during the third quarter of 2012, and the last peak was $3.17 per square foot in the fourth quarter of 2007.
There is a still a ways to go in order to reach peak asking rates, though the OC office market has shown growth in rental rates over the past 12 months. The South Orange County and Greater Airport Area submarkets have the highest asking rates in the region, ending the first quarter at $2.86 and $2.44 per square foot, respectively.
Market Fundementals
Overall market fundamentals have significantly improved and are showing signs of continuous acceleration. We expect lease rates to continue to grow and vacancy rates to continue to trend downward. Tenant demand remains strong, and the OC office market is poised to have a strong year.
Data and analysis provided by CBRE Research
