Mid-Rise Product Leads Office Leasing in OC

Mid- and low-rise product led office leasing activity in 2019. According to a report from JLL, the volume of mid- and low-rise office leases greater than 30,000 square feet was greater than high-rise product by a ratio of six to one. The surge in office leasing activity for this product segment is largely attributed to new construction activity.

“We are seeing a lot of activity in the new buildings,” Jeff Ingham, senior managing director at JLL, tells GlobeSt.com. “Clients today on the office side are very much looking for the new latest and greatest projects that have all of the amenities and indoor-outdoor space. Those are the things that are really attractive to employees and drive retention.” Three major mid- and low-rise properties came to the market this year, including Spectrum Terrace from the Irvine Co. and Boardwalk.

Tech companies and medical companies are leading the leasing activity in mid-rise office space. These companies are expanding and leading demand in general in the market, and they gravitate toward mid-rise and low-rise assets. “If you look at the groups that are leasing low rise space, the bulk are tech, medical device and life science-type companies,” says Ingham. “There has also been a lot of demand in co-working as well. Our local market growth is also in those three categories. Most traditional office companies, on the other hand, are getting more efficient with their space.”

As a result, high-rise spaces have largely become commodity spaces. “Ultimately, they are traditional and the same kind of buildings,” says Ingham. “Tenant demand has not really been driven toward those properties. I don’t think that people aren’t going to lease high-rise space. It is just that lately, demand is going toward low and mid-rise product.”

This year, mid- and low-rise properties will continue to attract the most attention from tenants, but the large volume of deals in 2019 was largely due to new deliveries. As a result, leasing activity in this segment could fall in 2020. “The trend will still be there in 2020, and companies will continue to look for these projects,” says Ingham. “The reality is there were three major projects this year that capture a lot of the leasing activity. That amount of space that is coming out of the ground from a timing stand point really captured a lot of the leasing this year. For 2020, I expect the trend to be the same.”