IRVINE, CA—Panelists at RealShare Orange County are bullish on creative-office space since the demand for this product type has hit the region and there's a definitive lack of supply. During the “OC Office: The Great Bounce Back” panel, speakers touted the longevity of collaborative space and the importance of designing office space around the people using it, which results in increased productivity and—after the initial outlay—ultimate cost savings.
Moderator Greg May, EVP and managing director of Newmark Grubb Knight Frank, called the bounce back an “upcoming bounce back,” but panelists were overall optimistic about the office sector's current strength here. Kevin Mitchell, VP of Cresa Orange County, said employment growth will continue to rise past 2006 levels, so there will be a need for new office space between now and 2017 with significant new construction beginning to kick up by late 2015. He said vacancy rates are expected to be in the single digits by mid-'15, and asking rental rates will continue to rise as concessions are reduced. The bid/ask spread on lease rates will narrow, and tenants are willing to pay a premium for high-quality, well-located office space.
Nevertheless, Bob Caudill, regional director, Orange County, for Colliers International, was a bit more conservative, saying, “There are still bargains to be had since the overall Orange County market hasn't gone to single-digit vacancy.” Wil Smith, principal/CEO of Greenlaw Partners, added now is the time to buy and sell, and there's a chance for rent growth as we move toward more of a landlord's market.
Joe Bevan, CCIM, EVP and national director of JLL, pointed out the need for development and redevelopment of creative-office space, since “most Orange County buildings were built by Baby Boomers for Baby Boomers. There are very few appealing properties for the next generation of employees, so we have to figure out how to position an asset for the 'walk-in-the-door cool and hip' factor.”
Bob Duncan, Jr., senior development partner of Caribou Industries, spoke of the renaissance of Santa Ana and his firm's development of One Broadway Plaza there, calling it a high-rise vertical office campus that is the next phase in office for Orange County. The amenity-rich, pet-friendly property will feature a 16-country world-cuisine food emporium, indoor virtual-reality world of gaming, state-of-the-art performing-arts theater, rooftop heliport and alfresco rooftop dining with a view of Catalina Island. Duncan touted the new development as “the incubator for your company.”
“Creative tenants will pay more if the amenities are there,” said Caudill. Smith echoed that there is at least 100,000 square feet looking for creative space in Orange County.
The panel ended with a round of “which inning are we in?” Most panelists said, regarding rent growth, we're in the either the fifth, sixth or seventh inning, but Michael Dorsey, managing principal of Coldwell Banker Commercial Alliance, said, “We're not in any inning,” adding that we're going through a lot of changes from infill development to redevelopment.
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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.
