The South Orange County office market performed well in the third quarter, recording 42,339 square feet of positive net absorption, though the activity fell short of that in the second quarter, which totaled 152,559 square feet of positive net absorption.
Vacancies
There was a continued trend of positive activity in the market, which can be attributed to the consistent decrease in vacancy. The vacancy rate dropped 0.2% to end the quarter at 8.7%. South Orange County had the lowest vacancy rate for office space in the county.
The Irvine Spectrum submarket is generally the strongest in the South OC market, though 101 square feet of negative net absorption was recorded during the quarter.
The net absorption decrease compared to 160,990 square feet of positive net absorption during the second quarter. The Irvine Spectrum submarket remained tight at a 3.9% vacancy rate, recording the second-lowest vacancy for a submarket in the county.
The Irvine Spectrum has one of the highest average asking lease rates in Orange County, posting $2.43 per square foot at the end of the quarter. The rate increased by 2%, or 5 cents per square foot, reflecting the positive trend in the market.
Overall, the average asking lease rate in South Orange County ended at $2.16 per square foot.
Research and development space recorded 63,696 square feet of positive net absorption in the quarter compared to 77,362 square feet recorded in the second.
The R&D vacancy rate dropped from 4.4% to 3.9%, a 12% decrease.
The majority of the healthy total activity can be attributed to the manufacturing and warehouse sector, which recorded 139,674 square feet of positive net absorption. The increase in occupancy brought down the vacancy rate from 3.9% to 3.2%, an 18% decrease.
Combined, the South OC market totaled 203,370 square feet of positive net absorption in the quarter compared to the 38,211 square feet of negative net absorption in the second quarter. The overall vacancy rate dropped from 4.1% to 3.5%, a 14.7% decrease.
Asking Rates
The average asking rate for the manufacturing and warehouse sector increased from 61 cents per square foot to 70 cents, and the R&D sector increased from 92 cents per square foot to 96 cents. That brought the overall asking rate to 82 cents per square foot, or steady from last quarter.
Haslam is an associate analyst at CBRE.
