MARKET DRIVERS
Since the beginning of 2021, the Orange County office inventory has sold a variety of portfolios as part of redevelopment initiatives into other property types, which should reduce some of the dismal stagnant space that now hangs over the local workspace.
The pace of new lease activity has risen steadily as businesses switch from remote to hybrid work schedules, with many tenants looking for high-end office property in convenient locations near amenities. Furthermore, the 4.3M SF of sublease space that has filled the market allowed businesses to lease at a reasonable price.
New workplace traditions have emerged because of numerous working-from-the-office tactics. Investors now have a popular target attributable to redevelopment plans, particularly when converting a property to industrial or multifamily housing.
ECONOMIC REVIEW
In November 2022, the adjusted unemployment rate in Orange County was 3.0%, below the 4.1% rate the previous year.
Education and Health Services experienced the second-largest employment gain (17,600); Social Assistance and Health Care (13,200) accounted for 75% of that growth; Professional and Commercial Services experienced employment growth, with Government (100).
NEAR-TERM OUTLOOK
Many companies in Orange County have continued to use hybrid and remote models, where net absorption is still low; as a result, a quick return to pre-pandemic norms is not expected anytime soon.
More than half of the more than 450K SF of office space under construction is currently available for lease. The primary business campuses have an abundance of spec development, which could raise the vacancy rates in these areas.
At the end of 2022, Apple will lease 115,000 SF in Spectrum Terrace’s third phase, which is in Irvine Spectrum. This contemporary campus with 1.1M SF is inspired by Silicon Valley’s inventive culture and tailored to the healthy Southern California lifestyle.
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