Activity for the office sector in general slowed a bit in the second quarter, and the low-rise office market recorded 118,967 square feet of negative net absorption, indicating a drop of 395,000 square feet year-over-year.
Low-rise office buildings account for approximately 55%, or about 55 million square feet, of Orange County’s office space, with 1,540 low-rise office buildings in the county, compared to 124 high-rise and 173 midrise office buildings.
Year-to-date net absorption in the county’s office sector remained in the black, totaling 189,614 square feet. The vacancy rate remained stagnant at 10.6%, despite the drop in absorption.
Year-over-year, vacancy within the low-rise office sector dropped significantly from the 12.4% recorded in the second quarter of 2012. The Greater Airport Area continues to hold the lowest vacancy rate among the submarkets in Orange County, at 10.3%, experiencing an increase from 9.4% in the previous quarter.
Average asking lease rates are starting to slowly tick upward after experiencing several quarters of a steady decline.
The average asking rate for low-rise office space increased 1 cent from the previous quarter to $1.81 per square foot. That’s still below the year-ago asking rate of $1.91 per square foot.
Lease rates have remained relatively flat due to the condition of the market, but as tenant demand increases, lease rates are expected to increase with it.
Asking rates in the South Orange County submarket increased 3 cents from the previous quarter to $1.91 per square foot, finally reaching the rate recorded in the second quarter of 2012.
The Central Orange County submarket experienced the greatest increase from the previous quarter, jumping up 7 cents to end the second quarter at $1.57 per square foot.
The rising trend of “creative” office space and increased tenant demand and activity should help boost overall market fundamentals for the office market. The outlook for the second half of 2013 remains positive.
Data and analysis provided by CBRE Research.
The Real Estate Watch Chart
Net Absorption, Rates, etc. is provided in a Adobe Reader .pdf print-friendly file.
