ORANGE COUNTY, CA-Orange County is continuing on its upward trajectory post-recession, and attorney Steve Edwards at Manatt, Phelps & Phillips LLP tells GlobeSt.com that it's a “hot, hot market.” Originally a farming and ranching community that eventually decided to sell land and start developing real estate, Orange County has emerged into a shining star among West Coast markets—one that has recovered from the economic downturn faster than most of California, boasting a 6% unemployment rate.
“The thing about Orange County is that it's kind of a special place,” Edwards tells GlobeSt.com. “You have to go back to the history of this area, which was heavily influenced by a small number of families that owned ranches. Basically, the chain of title goes almost from that family to the King of Spain.”
Edwards explains that a few American families acquired the land from Mexican ranch families—the Irvines, Segerstroms and O'Neills owned tremendous pieces of property in South County and began developing it during the postwar boom in the '60s. “These ranching families decided to sell their land to start developing real estate. Orange County benefits from the fact that there's a lot of centralized thinking about how the development is to proceed. It's relatively recent, modern thinking since it only started about 50 years ago.”
Of course, it doesn't hurt that Orange County is a physically beautiful place with the largest pleasure-boating region on the West Coast, Edwards points out. “It's been a destination resort—well before it was developed as an economic center, people from L.A. came here to spend their summers. Everybody all over the country knows Laguna Beach and Newport Beach.”
The fact that the area was also developed in a thoughtful way adds to its desirability. “We've got clean industry, great schools, a strong professional sector—a lot of law and accounting firms are here—and a lot of great housing stock,” says Edwards. “It's an extremely strong community. I read a long time ago that if Orange County was an independent nation, it would have the 25th highest GNP in the world.”
In addition to the UCI Irvine campus, whose land was donated by the Irvine family, the land-holding families were careful to develop office buildings, industrial parks and shopping centers that still stand, and the area has a strong commercial real estate sector based on financial services and technology focused on medical devices, biotech and computers. “This is what you need to succeed in the modern world,” says Edwards. “People want to move here because it's clean and you don't have to put your kids in private school. Pimco is headquartered here in Newport Beach—it could be anywhere, but it's here. It's well known that Orange County is a very strong market.”
Edwards says the strongest areas in Orange County are the coastal and South County regions, with Newport Beach being the jewel of the region. “That's where the nicest neighborhoods are and where a lot of the companies are headquartered. Newport Beach and Irvine and really the economic powerhouses that drive the county, I think. South County—Mission Viejo, Laguna Niguel and Rancho Santa Margarita are beautiful places to live and are doing very well.”
In terms of multifamily properties, Edwards points out that the demand for apartments in Orange County is outstripping supply, in part because of the difficulty in finding well-located apartment properties and the length of time needed to obtain government approvals to develop them. Edwards says because of the real estate downturn, homebuilders are building significantly fewer single-family homes for sale, and those that are built are sometimes hard to sell because credit requirements for mortgages have tightened significantly. Both factors hold down the number of buyers for new homes and increase the demand for apartments. Also, some in the millennial generation don't see the value proposition in home ownership because of recent price volatility and the perception that more money can be made by investing in tech and other opportunities.
In addition, as GlobeSt.com reports today, Edwards says the velocity of multifamily sales is fueled in part by the continued availability of low-interest financing from Freddie Mac and Fannie Mae, but the market could be challenged if the current political climate curtails that availability.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
