OC’s Airport Area Roars Back in Q4

The Airport Area of Orange County rebounded significantly in the fourth quarter, making up for a slow year. According to a new report from JLL, office leasing activity in the Airport Area accounted for more than half of the total leasing activity for office spaces above 25,000 square feet in the fourth quarter, minus renewals. Low-rise redeveloped office properties specifically drove leasing activity in the submarket.

“The fourth quarter did significantly better than the balance of the year. The fourth quarter really made up for the year,” Jeff Ingham, senior managing director at JLL, tells GlobeSt.com. “In the Airport Area, there has been some great large blocks of space and renovated projects, and those projects have seen more activity than others. The top three projects that took the bulk of the leasing momentum were UCI Research Park, The Met and a new property, The Boardwalk.”

Tenants are showing a preference for redeveloped, quality office spaces, and are looking to right-size current square footage and maximize efficiency. Because the Airport Area has large blocks of available space, it was a prime market for these tenants. “We are tracking tenants that are over 25,000 square feet, and in the fourth quarter we saw the number of blocks of space over 50,000 square feet dropped,” says Ingham. “It was the first quarter where that happened, and it is a sign that tenants are moving to quality. About three-quarters of the activity was in low-rise buildings and about 60% of it was in the class-B market as well, which was interesting.”

Technology and life science companies led the leasing activity in the submarket. Many of these companies are growing because of increased investment in healthcare. “The bulk are technology or life science oriented,” adds Ingham. “When we are talking about life science, a lot of it is medical device, and a lot of the tech firms are related to healthcare.”

Ingham expects the momentum in the fourth quarter to carry into quarter one and beyond in 2019. “We are seeing good activity,” he says. “The majority of the older-style companies or more mature companies are actually downsizing. They aren’t losing employees, but they are building out new space standards and getting more efficient with a more flexible work environment. A lot of those groups are moving into smaller square footage.”

The renovation trend should also continue through 2019. As companies move out of dated spaces and into renovated offices, landlords are taking the opportunity perform capital improvements. “I think that will keep us in balance. Capital is getting reinvested into older spaces, and we are seeing that both with the more mature companies and the tech and life science companies,” says Ingham. “As those companies are moving out of older spaces, those spaces are then being renovated.”