Why OC is More Robust and Diversified Than Ever

IRVINE, CA—Once driven by housing and professional-services firms, the Orange County economy is now leaning on its highly talented and entrepreneurial labor pool for innovation and growth, JLL's CEO, markets, Americas, John Gates tells GlobeSt.com. Gates was recently the keynote speaker for the University of Southern California's Lusk Center for Real Estate's event, the “Lusk Executive Forum – Orange County.” We caught up with him for an exclusive interview about the event, the current state of the Orange County real estate market and the economic drivers for current and future investment opportunities.

GlobeSt.com: What were the key takeaways from your keynote speech at the USC Lusk Center for Real Estate event?

Gates: In this high-growth phase of the market cycle, I hoped to shed light on how the global, national and local economies impact the commercial real estate industry. We are seeing a tremendous amount of growth across the broad, which is having a direct impact on the various sectors of the commercial real estate industry. I provided the folks of Southern California our perspective on where these trends are headed and what we will be keeping a close eye on over the near term.

GlobeSt.com: Can you elaborate on these trends and what you see as the economic drivers for current and future investment opportunities in Orange County real estate?

Gates: Orange County has emerged from the downturn as a more-robust and diversified economy than ever before. What was once a market driven by the housing and professional-services firms is now leaning on its highly talented and entrepreneurial labor pool for innovation and growth. Coupled with the high quality of life offered by Orange County, we're seeing investors buy into the long-term prospects of the market. As more foreign capital invests in primary gateway markets, we're going to see more domestic institutions look to core suburban markets like Orange County that offer high upsides for sustainable growth.

GlobeSt.com: How do you see the capital markets changing as the economy moves further into recovery and expansion?

Gates: We are starting to see a surge of foreign capital come ashore and funnel into primary US markets, which we have been expecting for some time now. The fundamental strength, liquidity and yields of the US markets are driving more global investors and sovereign wealth funds to core markets. According to our recently released digital skyline review, 44% of sales activity in the core office high-rise segment was driven by foreign buyers in 2014. This was up from 33% in 2013 with all signs pointing to continued foreign investment driving high-watermark prices in core office markets and distribution hubs for industrial assets. Overall, the structure of allocations to commercial real estate, both domestic and abroad, is ultimately expanding capital demand for product here in Southern California and across the country.

GlobeSt.com: What else should our readers know about this event?

Gates: Aside from being a little nervous speaking to a crowd full of USC Trojans as a Texas Longhorn, I was excited to represent JLL at this event to share some of the optimism we have about the current market conditions, as well as some of the potential risks that lurk beneath the surface. It's no secret that we're in the good years of this cycle, but I hope I imparted some thought-provoking ideas to the audience about how the commercial real estate industry is evolving and how we expect it shape the dynamics going forward.