IRVINE, CA—Orange County added 30,000 jobs during the month of May, according to a report from JLL, and while the number is robust, it’s not as strong as it could have been without some mitigating circumstances, Jeff Ingham, SVP with JLL, tells GlobeSt.com. Firms leaving California for less-expensive markets, contraction in the office sector and the not-too-distant memory of the recession are having a dampening effect on growth, he says.
“Regarding non-farm labor, our base of employment has grown by 10% over the last five years, which is pretty good from an economic perspective,” says Ingham. “But from a day-to-day perspective, while the employment is getting better, it’s not directly translating to real estate.”
While the amount of space occupied has grown, the office sector is taking less space per person, Ingham points out. “The way people are working at home and doing different things with technology, companies are doing more with less. So while we’re recovering, it’s at a slower pace than in the past.”
The growth is also very selective and compartmentalized, with areas like Fashion Island and the Irvine Spectrum growing faster—and seeing more new development—than North and West County, which are not seeing the same type of overall demand, says Ingham. In fact, within the growth markets, six build-to-suit projects are in the pipeline, which is a sign that unemployment is reaching low enough numbers. “Unemployment has dropped below 5% in Orange County for the first time in years,” says Ingham. “It’s getting better, but there’s still a conservative mindset on growth—they’re not betting the farm.”
Ingham predicts that the county will keep improving at the same pace through the end of the year, and even though companies are leaving the state, these are generally firms that don’t require the type of skilled labor in which Orange County is rich. “The growth of technical and specialized labor will continue in Southern California. We will keep chugging down and unemployment will decrease by the end of the year.”
In the areas that are growing, the types of companies are part of the reason, Ingham adds. “The reason why job growth is so strong in the Irvine Spectrum and Airport submarkets is that there are a lot of life sciences and medical-device companies there that are continuing to grow, and the favor those markets more than the North and West, which are more back-office markets.”
One potentially negative impact in the life-sciences category that Ingham points out would be the acquisition of Fortune 500 firm Allergan Inc. by Valeant Pharmaceuticals International Inc., both located in Irvine, which would result in a significant number of layoffs in order to cut expenses. However, news reports this week of Allergan’s rejection of Valeant’s most recent offer indicate that the can seems to be kicked farther down the road on this matter.
Beyond that, tourism looks to be growing—and leisure and hospitality is one of the strongest employment categories in JLL’s report on job growth—and should continue on this path as the economy gets healthier across the country, says Ingham. “People will travel to Southern California and Orange County, and this will increase leisure-and-hospitality employment.”