The Orange County office market continued to gain momentum in the second quarter, with leasing activity up and vacancy rates down.
The second quarter marked the fifth-straight period of positive net absorption, with more than 500,000 square feet. The office market has racked up 2.2 million square feet of absorption since the streak started in the second quarter of last year.
The John Wayne Airport area accounted for almost 41% of the net absorption.
Class A
Class A high-rise buildings continued to lead the segment, and tenants continued to take advantage of historically low lease rates and attractive concessions.
High-rise office space saw 370,731 square feet of absorption for the second quarter, up roughly 62,000 square feet from the prior period. That took the segment’s total to about 700,000 in the first half of the year.
Vacancies Dip
The gains throughout the office market took the overall vacancy rate for office space down to 18.4% from 19.8% in the first quarter.
Average asking monthly rental rates remained at $2.12 per square foot in the second quarter, unchanged from the prior period.
Significant transactions during the quarter include Cal Optima (111,728 square feet) and Liberty Mutual Insurance Co. (34,351) in Orange, as well as Costa Mesa-based Experian Information Solutions Inc.’s ConsumerInformation.com (87,882) and Epicor Software Corp. (68,235) in Irvine.
The most noteworthy lease came at the Irvine Company’s 380,000-square-foot, build-to-suit office for Pacific Investment Management Co. in Newport Center. The 20-story building is currently under construction and is expected to be completed in mid-2013.
Indicator
The Pimco project offers an indicator that large blocks of prime space are becoming harder to find in Orange County. That is fueling speculation that the market could see new construction in the near future. That’s not likely this year, when lease rates are expected to remain in their present range.
Murrell is a senior vice president in the Newport Beach office of CB Richard Ellis. Data and analysis provided by CBRE Research.
