IRVINE, CA—The scarcity of land in Orange County, like much of Southern California, has driven up prices so high that certain types of ground-up industrial development are extremely cost prohibitive and continues to push this type of construction outside of the region, Newmark Grubb Knight Frank senior managing director Jay Nugent tells GlobeSt.com. The firm recently reported that industrial construction in this market on a square-foot basis might be down, but the number of projects are up from 2015 as building activity continues to heat up in smaller-size segments. Also, vacancy across the region is hovering near a record low, while the Inland Empire comprised 78.4% of Southern California's development.

We spoke with Nugent about the main construction trends he's seeing in Orange County and where he sees this sector heading.

GlobeSt.com: What are the main construction trends you're noticing in Orange County?

Nugent: Multifamily and office construction are the main ones. There's been a huge increase in multifamily construction—it's up 76% since 2014, and office is up almost 200% since then. There's about 1.5 million square feet of office being built right now in Orange County. This includes Irvine Spectrum, which has a new tower, 400 Spectrum Dr., under construction, and NextGen, a 200,000-square-foot mid-rise building that will be preleased. There's also the Broadcom campus under construction, and Trammell Crow Co.'s Boardwalk project on Jamboree. There's about 2 million square feet of office under construction in the Airport market and nearly 10,000 units of apartments.

The product that is being built the least right now is industrial. It's not because the demand isn't there, but finding land to build it is very difficult. Because Orange County is becoming a very expensive place for land, industrial is being pushed out of county, and developers have to go to other locations. Land is too expensive to build a warehouse—it doesn't make sense.

GlobeSt.com: Which factors are causing certain sectors to have more construction and others to have less?

Nugent: In the office sector, historically more would be built, but we saw after the last downturn that developers are being cautious even though demand is fairly strong, Orange County has a more conservative approach this cycle, and it will benefit from this in the long run.

GlobeSt.com: What do you anticipate will happen in terms of construction in this market over the next few years?

Nugent: I think you'll continue to see it. The market will stay strong over the next couple of years, and you'll continue to see some new construction, but in my opinion, the majority of what will be built in this cycle is either underway or about to go underway. I don't foresee '18 or '19 having as much under construction as we're seeing today.

GlobeSt.com: What else should our readers know about construction in Orange County?

Nugent: We've had a conservative approach to construction, which is a positive, and unemployment was at 3.5% as of December 2016, the lowest it's ever been. The overall the health of the economy will stay strong because of the conservative approach people will take to new construction.

We spoke with Nugent about the main construction trends he's seeing in Orange County and where he sees this sector heading.

GlobeSt.com: What are the main construction trends you're noticing in Orange County?

GlobeSt.com: Which factors are causing certain sectors to have more construction and others to have less?

GlobeSt.com: What do you anticipate will happen in terms of construction in this market over the next few years?

GlobeSt.com: What else should our readers know about construction in Orange County?

Instant Insights /

Why It Doesn't Make Sense to Build a Warehouse in OC

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