The Orange County office market remained relatively steady during the third quarter on the heels of a strong first half of the year.
Leasing activity and net absorption remained in positive territory in the third quarter despite a drop-off from the prior periods.
The overall office market saw about 58,000 square feet of positive absorption in the third quarter. It was the sixth-consecutive quarter of positive absorption, and brought the year-to-date total close to 1.3 million square feet.
South OC Exceeds
The South Orange County submarket did better than the rest of Orange County with 100,000 square feet of net absorption, which accounted for 69% of the third quarter’s total.
Class B low-rise buildings leased up more rapidly than any other segment.
The total vacancy rate in Orange County stayed nearly constant at 15.7% in the third quarter, down slightly from the 15.8% the prior period.
South Orange County had the sharpest declines compared to the rest of the county. Central Orange County showed the only increase in vacancy among submarkets, rising to 16.8% from 16.2% the prior period.
Class A Vacancies Up
Vacancies in class A properties rose to 18.1% while vacancy in class B dropped to 13.7%. Class C properties saw a decrease to 14%.
The overall vacancy rate has dropped steadily on a quarterly basis since peaking at 18.2% in the first quarter of 2010.
The overall availability rate countywide dropped by nearly one percentage point to 21.4% in the third quarter. All submarkets saw declining availability rates except for West Orange County.
Average asking lease rates continued to decrease in the third quarter. It was the 15th-straight quarter that the Orange County office market saw declining rents. The streak goes back to a pre-recession peak in the fourth quarter of 2007, when the average asking lease rate stood at $2.78.
$1.95 Per SF
The average asking rate dropped to $1.95 per square foot in the third quarter, down one cent from the prior period.
Asking rates in class A properties remained steady at $2.11 per square foot in the third quarter. Class B properties recorded an average asking rate of $1.80, one cent higher than the prior period. Class C properties dropped one cent to $1.59.
A handful of owners increased asking rates in anticipation of a recovering economy, but most were once again pressured to keep rates low in order to stay competitive.
Construction in Orange County remained minimal in the third quarter, with no new major office projects in the works. Construction on the preleased, 194,000-square-foot office building in Anaheim for Extron Electronics is nearing completion.
A 380,000-square-foot Pacific Invest-ment Management Co. headquarters tower at Newport Center is scheduled to begin construction in the fourth quarter.
Hyundai Motor America Inc. is scheduled to break ground on a 470,000-square-foot headquarters to replace its current one in Fountain Valley by the end of the year.
Analysis provided by CBRE Research.
