— By Tim Donald of JLL Capital Markets —
When investment capital flows into Orange County’s office market today, it’s revealing a fundamental shift that sophisticated investors can’t afford to ignore: the distinction between quality and commodity office space has never been more pronounced, and that gap is only widening.
The challenge for many investors has been identifying opportunities that offer both stability and upside in an environment where traditional core assets provide minimal growth while pure value-add plays carry significant execution risk. What we’re seeing emerge in Orange County is a compelling middle ground, deals that feel core-plus but deliver value-add returns, and there’s substantial liquidity chasing these opportunities.
The Tier System Reshapes Investment Strategy
JLL’s national office team has developed a tiering system that divides office properties into distinct quality categories based on amenities, location and tenant appeal. In Orange County, this frame-work has revealed a market operating on fundamentally different planes. Tier I assets, representing a small fraction of the county’s inventory, are demonstrating exceptional resilience while Tier II properties continue to attract significant tenant and investor interest.
This isn’t just academic categorization. The performance differential shows that investors are willing to pay premiums for assets with clear competitive advantages, but they’re also finding significant value in the tier just below the absolute pinnacle. Quality Tier II assets are attracting serious capital because they offer the fundamentals investors want with more attractive entry pricing.
Market Dynamics Favor Quality Assets
While traditional vacancy metrics provide useful insight, data suggests these rates may be overstated because conversion factors are not reflected in the analysis. We’ve studied the inventory extensively on where supply is heading with ongoing conversions, and the picture becomes much more compelling for quality assets.
Massive amounts of existing office inventory are being converted, effectively removing this space from the competitive set permanently. When you factor in these conversions alongside a construction pipeline at its lowest level since 2011, the true available supply for quality office space is significantly tighter than headline numbers suggest.
The rent spreads between quality and commodity office continue expanding as landlords gain pricing power in well-positioned assets. This divergence reflects the fundamental shift in tenant preferences toward premium locations and amenities.
Investment Outlook
Looking ahead to 2026, several factors should continue supporting pricing for quality assets. Limited development pipeline means supply constraints will persist, while ongoing corporate expansions suggest demand for premium space remains intact. The significant transaction volume we’ve facilitated demonstrates continued investor appetite for well-positioned assets.
The most sophisticated investors understand that Orange County’s office market isn’t recovering uniformly. Instead, it’s bifurcating between winners and losers. The capital flowing toward core-plus opportunities with value-add potential reflects recognition that today’s market rewards strategic thinking over passive ownership.
For investors who can identify assets with strong fundamentals and clear improvement pathways, there’s abundant liquidity and competitive returns available.
— By Tim Donald, Director, JLL Capital Markets. This article was originally published in the February 2026 issue of Western Real Estate Business.