Orange County Office Tenants Seek Instagram-Worthy Environments to Collaborate
By Mike Adams, Managing Director, Stream Realty Partners
The state of office is transitioning to a desire for dynamic spaces. Tenants in the Orange County office market are gravitating toward assets that act and function like hotels. They are seeking out the newest buildings and the most unique office environments. This is evidenced through leasing activity being the strongest in the Irvine/Tustin Legacy and Irvine Spectrum submarkets.
Employers are looking for a reason to bring their workforce back to the office and are recruiting high-caliber employees. One way to do this is through office space. Creative office space is still in high demand — and won’t likely change soon. Companies focused on employee retention want to create an “Instagram-worthy” type office environment. They are looking for office space that will create a buzz and function as a recruiting tool.
Office buildings are unique assets that facilitate collaboration, culture and training. This interest in new development signifies a flight to quality of office assets — for landlords and tenants alike.
Several trends related to the desire for quality include:
- Hotelization — office spaces that act and function as hotels
- Biophilic design — the concept of connecting a building with nature
- Proptech — using innovative technology and software
Office-to-industrial conversions are also a continued trend. There is nearly 1.4 million square feet of office-to-industrial conversions occurring in the Orange County market, with the largest being the Amazon redevelopment at 275 Valencia Ave. in Brea.
County-wide, there are 17 office buildings under construction, comprising nearly 1.3 million square feet. The Irvine Company accounts for 47 percent of the total development pipeline, largely in the Irvine Spectrum. Evidence of the demand here is Apple’s reported pre-leasing of a building in Spectrum Terrace’s latest phase. Beyond that, 1.2 million square feet were delivered over the past two years. That new product has leased well, currently at 84 percent.
There are also 1.3 million square feet of proposed office projects that have yet to break ground. The largest is Merlone Geier Partners’ 465,000-square-foot The Village at
Laguna Hills. The talk in South County is who will land the U.S. General Services Administration (GSA) tenants in the market as they start to unwind the 1-million-square-foot-plus Chet Holifield building in Laguna Niguel.
From a capital markets standpoint, OC office sales transactions over the past 12 months total more than $1.5 billion (in buildings with more than 75,000 square feet). This compares to just over $1 billion in the prior 12 months. The increase in transaction volume is largely due to strong activity in the third and fourth quarters of 2021, as well as a few major institutional deals.