NEWPORT BEACH, CA—More open blocks of land that were finally being developed in a less-dense environment is one reason why Orange County's office development eclipsed that of Los Angeles in 2017, CBRE first VP Garrett Ellis and senior associate Carter Haslam tell GlobeSt.com.

According to a recent report from the firm, last year 2.5 million square feet of new office product were added in Orange County, of which more than half were pre-leased at time of completion; this was a greater amount of office development added than the 2.4 million square feet Los Angeles County saw completed last year, despite the fact that L.A. is considerably larger than Orange County. This new high-quality space helped push asking lease rates above prior peak levels, even as vacancy rates increased slightly.

We spoke with Ellis and Haslam about the drivers for this development in Orange County and whether it's expected to continue.

GlobeSt.com: Why did Orange County's office market see more development in 2017 than L.A.'s did?

Ellis: In general, Orange County is less dense than Los Angeles, and as such, more open blocks of land have been available for a while that are now finally being developed. Some of those sites have been devoted to residential developments, and others are being used to construct office buildings. More than 2.5 million square feet of office product were completed last year in the OC, and of that, more than half were pre-leased at the time of completion. It shows that Orange County has done a great job in positioning itself not just as a great office market but as a great creative-office market. A lot of landlords are focusing on creating spaces that feature modern open-floor plans, great common areas and amenities. That in turn has resulted in a great influx and retention of workers and has been particularly attractive to the Millennials and the firms they work for.

GlobeSt.com: Do you anticipate the volume of office deliveries for 2018 to match that of 2017?

Haslam: It's not likely that this sort of volume will be repeated two years in a row; however, there are still a few office projects scheduled for 2018 completion.

GlobeSt.com: What are the chief concerns for OC office developers at this point in the cycle?

Ellis: The main concern is whether or not they can deliver while the market is still up and unemployment is still low. The jobless rate in the OC reached near historic lows toward the end of last year. But the economy, both locally and nationally, is holding up well, so 2018 is still a safe year by which to deliver an office building.

GlobeSt.com: What else should our readers take away from your Q4 OC office report?

Haslam: Supply is pacing well with demand in the OC. A lot of companies are reevaluating their space needs, and while that can mean they are cutting down on their footprints, it also means they are seeking newer or renovated spaces and are willing to pay a premium.

Instant Insights /

How OC Eclipsed L.A. in '17 Office Development

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