Sim Sees Orange County Market Remaining Strong in 2001

In his economic forecast delivered Thursday to members of the Building Owners and Managers Association of Orange County, Sim described the current economic situation for the county as strong in terms of the commercial real estate market through the year, even though the rate of economic growth in the county is projected to slow down.

"I'm still amazed at the rents and absorption rate in Orange County compared to the rest of the country," Sim said. "Growth peaked in 1998. Now we're seeing a more normal market, but positive. It's much more sustainable."

Discussing the various sectors of the market, Sim pointed to the record low vacancy rate of 7.7% for office product in 2000. In addition, there is 3.6 million sf of office/flex tech product currently under construction. Active industry clusters absorbing much of this product include high tech, automotive, biotechnology and financial services.

The Irvine Co.'s four business parks--the Irvine Spectrum, Irvine Technology Center, University Research Park, and Jamboree Business Center--all have done well in leasing out space. The Irvine Spectrum has steadily grown from 250 companies with 2,200 employees when it was founded in 1984, to 2,600 companies with 55,000 employees for 1999/2000. "We have a deliberate policy of not looking at one business, but at diverse businesses," he said. "We've been locating four companies a week for the past decade."

On the industrial side, Sim sees a lack of supply of both industrial and R&D product gripping the county's market, with only 1.6 million sf of product being built in the south county. Telecommunications is the hot industry for this type of product in the county right now.

In the retail sector, the Irvine Co. has built three new centers, although construction is limited countywide. Large anchored centers enjoyed strong sales last year, and lease rates are continuing to rise in the Irvine and south county submarkets.

Affordable housing continues to be a challenge. The county's population has grown since 1990, up 17% to 2.8 million people. Seventy-seven percent of that growth is from local births, with the rest from immigration. The company is set to open 1,633 units by this summer, of which 1,184 units are in Irvine. The company's Oak Glen apartment complex is scheduled to open in March, and the Las Palmas apartments are set to open in April-- both offering less expensive rental rates, he said.

Responding to a question regarding the fate of the El Toro Marine Corps Air Station, Sim was non-committal, saying that company will wait until all environmental reports are in before taking a position on the controversial airport. "We're good planners. We need to see the impact, then we'll come to a conclusion."

As for the economy, Sim said the only thing certain is change, and smart real estate professionals will be ready for it instead of reacting to it.