The leasing market for low-rise office buildings is improving.
There are 1,545 low-rise office properties in Orange County, which is about 84% of the total of office buildings. The local low-rise office space accounts for 55.1 million square feet, more than 55% of the total of OC office space.
The overall vacancy rate for low-rise offices fell to 12.5% at the end of second-quarter 2012, a decline from 13.1% in the previous quarter. The rate of decline in the low-rise vacancy rate is outpacing that of high-rise space (16%) and midrise space (17%), but vacant low-rise space represents almost half of the total Orange County office vacancy.
There is currently 10.5 million square feet of low-rise space available for lease. That includes occupied and vacant space.
Low-rise office projects here had strong positive absorption in the second quarter at 263,048 square feet.
The year-to-date absorption—when combined with the 283,841 square feet absorbed in the first quarter—totaled 546,889 square feet through June. The average asking lease rate is currently $1.79 per square foot, down slightly from $1.82 per square foot at the same time last year.
One reason for the strong activity in the low-rise sector is that many businesses are looking save costs by taking advantage of the lower lease rates and incentives available in the low-rise sector of the market.
And tenants in low-rise buildings tend to have lower operating expense costs compared to those in high-rise and midrise properties.
Vacancy was the lowest in the Greater Airport Area submarket, which dropped to 10.8% in the second quarter from 13.1% a year ago. South Orange County saw vacancy decline to 13.3%, while rates in Central, North and West OC were 14.4%, 12.5% and 16.1%, respectively.
There was 60,413 square feet of net absorption in the Greater Airport Area in the second quarter. South OC saw 60,413 square feet of absorption and North OC 11,604 square feet. Central OC marked 43,336 square feet of net absorption, and West OC dipped by 32,054 square feet.
Abel is a first vice president in the Orange office of CBRE Group Inc.
