IRVINE, CA—Until this quarter, Orange County's office statistics have not supported what those in the know have seen: the office market is truly in favor of landlords, Savills Studley's EVP, branch manager, Royce Sharf tells GlobeSt.com. We spoke with Sharf exclusively after the release of his firm's Q1 Orange County office report to find out the biggest takeaways and trends in this market.
GlobeSt.com: What do you find most compelling about the Q1 Orange County office data?
Sharf: Finally, the statistics are supporting what have, until this quarter, been unsubstantiated predictions that the pendulum has swung in the favor of area landlords. We have seen a meaningful increase in leasing activity and a corresponding reduction in the vacancy rate. While asking lease rates have only slightly increased so far, we expect them to do so in an impactful manner over the coming quarters.
GlobeSt.com: With big blocks dwindling and availability at an eight-year low, what do you expect to see in terms of development in this market?
Sharf: We are already seeing new speculative development from the county's dominant landlord, the Irvine Co. They recently completed 520 Newport Center Dr.and will soon complete 200 Spectrum Center. Trammell Crow is said to be close to kicking off its speculative project in the Airport, while others, such as Hines and LBA, are entitled, planned and prepared to move forward when they decide the time is right to do so.
GlobeSt.com: What types of value-add scenarios are most common in this region?
Sharf: Clearly, the trend of repositioning older assets into creative office is continuing to grow. A leader in this effort locally is Bixby Land Co. They have several such second-generation rehab projects in various stages.
GlobeSt.com: What else should our readers take away from the report?
Sharf: Ultimately, whoever signs leases and pays rent is in the driver's seat, so, by definition, tenants will always have negotiating leverage. With that said, a strong local economy is stimulating robust demand and reducing vacancy rate across the board. Barring any unforeseen disruption in that pattern, we should expect lease rates to continue to increase in a commensurate fashion.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
