NEWPORT BEACH, CA—Orange County's incubation of medical-device companies, technology firms, biomedical research and other high-growth industries will continue to provide diversity the Orange County economy and stabilize the office sector, CBRE first VP Carol Trapani tells GlobeSt.com.

According to a recent report from the firm, the Orange County office market is a landlord's market due to the low availability rate. Strong employment growth in the market has continued to be the primary driver of improving fundamentals at this point in the cycle, but that growth has tapered somewhat recently since low unemployment rates made it difficult for employers to expand as rapidly as earlier in the cycle.

The report also revealed that aggressive pushing of lease rates has come to an end and will likely soften a bit further as new office product comes online in 2017. CBRE Econometric Advisors predicts 7% rent growth over the next four quarters, more or less in line with the recent pace of rent increases.

Overall, the report showed, fundamentals are better in Orange County compared with this time in the previous cycle. The employment base is much more diverse, and employment growth is no longer concentrated in the subprime lending industry. Capital markets are strong, but pricing is still well below the exuberant levels present in 2008.

We spoke with Trapani about the Orange County office market's strengths and how it might weather future economic storms.

GlobeSt.com: At what point during or after the recession did Orange County's office market become a landlord's market?

Trapani: The Orange County office market started on a positive trajectory in the fourth quarter of 2012 since that year ended with more than 2 million square feet of positive absorption, according to our research. In addition, Orange County added more than 16,700 new jobs, and unemployment dipped below both California and the national average. That kind of confidence in the market was further evidenced by the strong demand for office product from both the capital markets and occupier side since more than 900,000 square feet of build-to-suits were under construction.

GlobeSt.com: What did the sector do right to recover from the recession the way it did?

Trapani: Orange County has done a fantastic job in diversifying its economy. Plus, the continued population growth, our unparalleled living environment, world-class amenities and relatively low occupancy costs have helped to sustain the health of the office market and propel its growth.

GlobeSt.com: How can the sector mitigate future downturns in the market?

Trapani: Employment and rent growth are necessary tools in balancing the supply side of the equation when you look at our CBRE Econometric models for forecasting demand. Orange County's incubation of medical device companies, technology firms, biomedical research, and other high-growth industries will continue to provide diversity in our economy and stabilize the office sector.

GlobeSt.com: What else should our readers know about Orange County office as a landlord's market?

Trapani: The Orange County office market is a landlord's market due to the current low availability rate. Strong employment growth in the OC has continued to be the primary driver of improving fundamentals at this point in the cycle. Rent growth is predicted to increase by 7% over the next four quarters, our research shows. Even so, Orange County office rents are a bargain compared with other metropolitan areas, regionally, nationally and globally.

We spoke with Trapani about the Orange County office market's strengths and how it might weather future economic storms.

GlobeSt.com: At what point during or after the recession did Orange County's office market become a landlord's market?

GlobeSt.com: What did the sector do right to recover from the recession the way it did?

GlobeSt.com: How can the sector mitigate future downturns in the market?

GlobeSt.com: What else should our readers know about Orange County office as a landlord's market?

Instant Insights /

How OC Office Can Withstand Future Downturns

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