Orange County continues to be a diverse marketplace for commercial real estate as we reflect back on 2019. Thanks to a growing and varied workforce made up of highly skilled and educated workers — with tech and life sciences at the forefront of transactions — the county’s economy remains strong. Looking ahead, Orange County’s local market is very resilient, despite the fact that economy leasing volume has slowed as tenants are focusing on space-efficient decisions.
Cody Cannon, Colliers International
This market continues to remain stable thanks to a number of existing buildings that have been or are currently under renovation to meet the demand of companies that are branching out from traditional office space. A few of these repositioned properties include the Launch, the Met, 2722 Michelson Drive and the Press, which is currently under construction in Costa Mesa. Overall vacancy in the county has been 13.8 percent, while overall asking rental rates are $2.95 per square foot (full-service gross) with Class A rates sitting at $3.23 per square foot.
Some submarkets are home to the majority of this activity, including the Airport area and South Orange County due to ideal geographic locations for businesses and new office development. Of course, fundamentals vary by submarket regarding opportunities for tenants.
As we move into 2020 and see vacancy and rental rates continue to flatten, these factors will provide more leverage for tenants when negotiating lease terms, making it a renter’s market. We found that tenants are wanting more options when it comes to lease structures, offering shorter terms and collaborative, open spaces. Tenants are attracted to the incentives creative space has to offer as it helps them acquire and retain talent.
Although Orange County was late to the co-working space demand, this trend is now very present in Orange County. WeWork moved into three separate locations totaling 221,500 square feet during the fourth quarter of 2019, bringing the company’s total footprint in the county to 522,425 square feet. This shift in workspace trends is challenging landlords to offer flexible, shorter-term lease options that create more collaborative and accessible spaces for tenants.
— By Cody Cannon, executive managing director, Colliers International. This article first appeared in the February 2020 issue of Western Real Estate Business magazine.