IRVINE, CA-Orange County faces a number of challenges and bonuses in the recovering CRE market. GlobeSt.com caught up with Jeffrey Shepard, newly hired principal and SVP at Hughes Marino here and co-founder and former partner of Cresa, as GlobeSt.com reported last week, to discuss some of these issues and his role at the firm.

GlobeSt.com: How will you apply your work with Cresa to your new role at Hughes Marino?

Jeffrey Shepard: My years at Cresa helped me further develop my leadership skills and grow stronger and more knowledgeable in the industry while developing exceptional relationships. A big part of that development was cultivated from the terrific people who put their trust in me, allowing me to be a part of their organization's very important projects.

At Hughes Marino, I will be able to continue this growth and further develop my own leadership abilities, while learning from and working with the exceptional professionals in Hughes Marino's Orange County office.

GlobeSt.com: What are the biggest challenges to developing industrial space in Southern California right now?

Shepard: Overall, the industrial sector has demonstrated significant strengthening over the past 12 months. Today's biggest challenge is centered on a lack of availability of quality industrial land throughout Southern California. Moving forward, industrial users who want to secure high-quality buildings will need to alter their mindset and commence their planning efforts much earlier than ever before to create more options and better negotiating leverage.

GlobeSt.com: How about office development? What's in store for the Orange County office market?

Shepard: Although no new speculative office buildings have been in Orange County for several years, there is new office development on the horizon. The market is approaching a 10% vacancy rate, which has often been seen as the Maginot line, below which new speculative development is triggered. Once that speculative development begins, it will still be two to three years before we see new office space delivered to the market. In the meantime, unemployment rates have dropped while, as noted, the supply of office space has tightened. Despite this, lease rates for quality office space have still remained steady at near historical low levels.

GlobeSt.com: Which current conditions make leasing activity in Orange County a favorable prospect? Which conditions make it a challenge?

Shepard: As noted above, despite a tightening supply of quality office space and the return of more employees to the workforce (which further increases demand for space), office lease rates are near historical low levels. This creates a unique window of opportunity for companies to negotiate or renegotiate their office leases prior to the inevitable rise in rental rates that is forthcoming. In the industrial sector, leasing throughout Southern California will continue to be a challenge due to diminishing supply of quality product, further creating ongoing landlord-favored conditions. This will necessitate tenants/ users to not only start earlier to allow for build-to-suit opportunities to be considered, but also include other non-real estate factors in the negotiation equation with landlords, such as labor, energy, incentives and freight costs.