Recovery Extends to Small Businesses

NEWPORT BEACH, CA-The big- and small-picture view on Orange County commercial real estate is positive, industry experts say. While some sectors and geographic regions are taking longer to bounce back, the recovery is strong and solid in almost every area. GlobeSt.com recently spoke with Kurt Strasmann, senior managing director of CBRE's Newport Beach operations—who  is moderating a panel next Thursday, August 22, during RealShare Orange County on investment, leasing and development activity in Orange County and how it fits into the big picture—about the different sectors and what conference attendees can expect to learn.

GlobeSt.com: What should attendees know about investment in Orange County's major property sectors?

Kurt Strasmann: The investment market continues to demonstrate strength both on institutional properties as well as private-capital properties. Overall fundamentals continue to improve, slowly but surely, in every category except office, where rent growth is just starting to come around. There is still a lack of product, so when opportunities do come available, there are multiple buyer entities interested. The question really becomes, “Is the price acceptable to the owner?”

GlobeSt.com: What about leasing—what are the most notable trends there?

Strasmann: The biggest difference from the past two years or so is that our recovery is now positively affecting small business. In the past, the recovery centered on big business and large corporations, but not local businesses. Today, the recovery is broad-based across multiple industry types for both large and small companies. The second major trend is that quality space is commanding premium pricing while class-B and –C properties have still not seen true rental appreciation. Finally, the user-sale market has been exceptionally strong with big-market value appreciation.

GlobeSt.com: How is the development horizon changing as we move further into the recovery?

Strasmann: Industrial development is back and very active, not only in Orange County but throughout the Greater Los Angeles region as well. Currently, there are a handful of industrial developments in progress, led by the 80-acre Panattoni/Clarion development in East Anaheim. The demand is for quality, functional space, both for lease or sale. Much of our market is made up of older properties, so anything new that has all the bells and whistles becomes extremely attractive to potential buyers. On the office side, we are still a ways off—office rents need to catch up.

GlobeSt.com: How do all these categories fit into the larger Southern California and national commercial real estate picture?

Strasmann: Overall, Southern California is performing very well. In my opinion, Orange County is leading the way within the region due to strong job growth, which is the biggest driver, as well as positive net absorption and gross activity, strong user-sale activity, decreases in vacancy levels on both office and industrial product and new ground-up development. We have a well-diversified economy that is benefitting the commercial real estate market. Nationally, commercial real estate is coming back as well, with most major metropolitan cities on the rebound. From my vantage point, the next few years in commercial real estate look promising.