What Central OC Offers That Other Submarkets Don't

IRVINE, CA—In addition to having a strong and diverse labor pool that even pulls from outside the county, Central Orange County is a transportation hub that lies in the path of where most of the area's Millennials live, JLL SVP Andy White tells GlobeSt.com. According to the firm's Q1 office report for Orange County, the Airport Area and Central County are leading large-block leasing activity. We spoke with White about the Central County region and why it is drawing office users.

GlobeSt.com: How do you view Central Orange County's potential as a strong office submarket?

White: I definitely view Central Orange County as a strong submarket now; it has historically been a strong submarket and will continue to be one in the future. When you look at it, it's a large submarket, it's half as big as the Airport Area and it occupies a core fundamental position for Orange County.

GlobeSt.com: Is this submarket catching the overflow from the Airport market?

White: I would say every market in Orange County is experiencing some kind of overflow, especially with the larger-user requirements. Central Orange County activity features many tenants within the market or relocating from other areas of the country, although the latter is not as frequent. It's primarily large-tenant activity from within the county; however, because there is less space all over in Orange County, tenants in the Airport Area have to increase their concentric circles and are looking at other areas for more variety. There are fewer spaces in North Orange County, Cerritos and West Orange County as well. So, we're seeing some activity definitely from North Orange County going south and from Cerritos going southeast. Central Orange County, being an almost 20-million-square-foot market, is bigger than Brea or Cerritos. As smaller markets get full, you see a dropdown into Central Orange County, and we are seeing this now.

GlobeSt.com: What does Central County have to offer that other parts of the county don't?

White: Central County has always been and will continue to be a market based on utility. The primary driver of that utility is transportation from a hub location and also the ability to hire different levels of workers from a 360-degree radius. There's no submarket in the county that has the ability to pull such a diverse labor pool—that's always been Central Orange County's driver. If you're commuting from Newport Beach to Central Orange County in the morning, you have a 20-minute drive, so you can pull from almost any area of Orange County, the San Gabriel Valley and also the Inland Empire.

GlobeSt.com: What are the advantages of office tenants choosing this area to lease space?

White: When you look at Central Orange County's multiple commuter-rail hubs with Orange, Anaheim, the Artic station and also the station along Tustin Ave. from the 55 to the 91, Central Orange County has the most transportation options by far versus other submarkets. Using rail for commuting is very attractive to a lot of office users, and with the freeways coming together as they do, it's really a transportation-driven market. Not to mention, you also have basically all the same amenities as the Airport Area does: hotels, John Wayne Airport, proximity to Long Beach, hospitality, dining. And you have access to Millennials— what JLL calls the Millennials belt, according to heat maps that show where all the Millennials live. There's a large swath of Orange County where Millennials live that starts at Cal State Fullerton, drops down thru the stadium area and Santa Ana to the Airport Area. This is an often-overlooked strength of Central Orange County. When people think “Airport Area,” they think high-growth companies and the ability to attract Millennials, but Central Orange County has the ability to capture a greater share of the workforce because of its proximity to these institutions. Many choose Central Orange County as their hub because of those logistical issues.

As far as rental rates—Central Orange County hasn't seen the huge rental rate spikes that the Airport Area has. Central Orange County does have some of the best potential, with no new buildings coming online, shrinking vacancy, increased activity and quality assets. It's not that different from the Airport Area, but offers a lot lower price per square foot. For Class-A product (not Class-A-plus), compared to the Airport Area, you're basically 50 cents less per square foot on average.

IRVINE, CA—In addition to having a strong and diverse labor pool that even pulls from outside the county, Central Orange County is a transportation hub that lies in the path of where most of the area's Millennials live, JLL SVP Andy White tells GlobeSt.com. According to the firm's Q1 office report for Orange County, the Airport Area and Central County are leading large-block leasing activity. We spoke with White about the Central County region and why it is drawing office users.

GlobeSt.com: How do you view Central Orange County's potential as a strong office submarket?

White: I definitely view Central Orange County as a strong submarket now; it has historically been a strong submarket and will continue to be one in the future. When you look at it, it's a large submarket, it's half as big as the Airport Area and it occupies a core fundamental position for Orange County.

GlobeSt.com: Is this submarket catching the overflow from the Airport market?

White: I would say every market in Orange County is experiencing some kind of overflow, especially with the larger-user requirements. Central Orange County activity features many tenants within the market or relocating from other areas of the country, although the latter is not as frequent. It's primarily large-tenant activity from within the county; however, because there is less space all over in Orange County, tenants in the Airport Area have to increase their concentric circles and are looking at other areas for more variety. There are fewer spaces in North Orange County, Cerritos and West Orange County as well. So, we're seeing some activity definitely from North Orange County going south and from Cerritos going southeast. Central Orange County, being an almost 20-million-square-foot market, is bigger than Brea or Cerritos. As smaller markets get full, you see a dropdown into Central Orange County, and we are seeing this now.

GlobeSt.com: What does Central County have to offer that other parts of the county don't?

White: Central County has always been and will continue to be a market based on utility. The primary driver of that utility is transportation from a hub location and also the ability to hire different levels of workers from a 360-degree radius. There's no submarket in the county that has the ability to pull such a diverse labor pool—that's always been Central Orange County's driver. If you're commuting from Newport Beach to Central Orange County in the morning, you have a 20-minute drive, so you can pull from almost any area of Orange County, the San Gabriel Valley and also the Inland Empire.

GlobeSt.com: What are the advantages of office tenants choosing this area to lease space?

White: When you look at Central Orange County's multiple commuter-rail hubs with Orange, Anaheim, the Artic station and also the station along Tustin Ave. from the 55 to the 91, Central Orange County has the most transportation options by far versus other submarkets. Using rail for commuting is very attractive to a lot of office users, and with the freeways coming together as they do, it's really a transportation-driven market. Not to mention, you also have basically all the same amenities as the Airport Area does: hotels, John Wayne Airport, proximity to Long Beach, hospitality, dining. And you have access to Millennials— what JLL calls the Millennials belt, according to heat maps that show where all the Millennials live. There's a large swath of Orange County where Millennials live that starts at Cal State Fullerton, drops down thru the stadium area and Santa Ana to the Airport Area. This is an often-overlooked strength of Central Orange County. When people think “Airport Area,” they think high-growth companies and the ability to attract Millennials, but Central Orange County has the ability to capture a greater share of the workforce because of its proximity to these institutions. Many choose Central Orange County as their hub because of those logistical issues.

As far as rental rates—Central Orange County hasn't seen the huge rental rate spikes that the Airport Area has. Central Orange County does have some of the best potential, with no new buildings coming online, shrinking vacancy, increased activity and quality assets. It's not that different from the Airport Area, but offers a lot lower price per square foot. For Class-A product (not Class-A-plus), compared to the Airport Area, you're basically 50 cents less per square foot on average.