Spiking Prices Will Fuel Rent Growth

IRVINE, CA—The Orange County office market saw more than 1.1 million square feet of positive net absorption in the second quarter, marking the highest single quarter of net absorption since 2005, according to JLL. Rental rates are expected to climb in the future as landlords like the Irvine Co. continue to push rates throughout the county, but the main factor that will cause office rents to rise is the increase in sales prices as investors clamor for trades, Jeff Ingham, senior managing director of JLL, tells GlobeSt.com.

“The sales market is really on fire, which will have a bigger impact on rental-rate increases than other market trends,” says Ingham. “Investors need to pay more than everybody else to get the deal, so they’ll need higher rents to justify the purchase to themselves. A number of buildings have sold recently—One Pacific Plaza in Huntington Beach, 2030 Main St. in the Irvine Concourse and a 130,000-square-foot vacant building in Santa Ana—and all those buyers are expecting more rent than the previous ownership in order to justify the prices. The trades happening now are not generally from distressed owners; that went away a while ago.”