SOUTHERN CALIFORNIA—The economy has recovered to the point where cranes are in the sky in many areas of Southern California. GlobeSt.com spoke exclusively with several experts in the market about which submarkets have the most spec-office development.

Jerry Holdner, VP of market research for Voit Real Estate Services, tells GlobeSt.com, "Currently in Southern California, there are 70 office buildings totaling 6 million square feet under construction," and he adds that the great majority of this, if not all of it, is speculative. "Los Angeles is leading the charge with 34 buildings totaling 3.3 million square feet under construction. Of this total, six buildings totaling 1.3 million square feet is in the Downtown submarket, five buildings totaling 890,000 square feet are in the Mid-Wilshire submarket and three buildings totaling 500,000 square feet are the Playa Vista submarket. Orange County has 14 buildings totaling 1.9 million square feet under construction. Of that total, 11 buildings totaling 1.7 million square feet are in the Irvine Spectrum submarket. San Diego has 12 buildings totaling 625,000 square feet under construction. The Inland Empire has five buildings under construction totaling 100,000 square feet."

In Los Angeles, the area along the coast from El Segundo to Santa Monica has been among the strongest and most publicized for development and redevelopment, Gary Steinhardt, senior director, investment group, for American Realty Advisors, tells GlobeSt.com. "However, land is scarce and expensive, making sites hard to find. Hollywood, the center of the entertainment industry, is seeing significant investment in all property types, including office construction, which—like in Downtown—is complemented by apartment construction and improving retail and entertainment amenities. In these markets, traditional space appears to be lagging, and demand for unique and/or creative space appears very strong."

Steinhardt adds that Downtown L.A. is seeing its first new office addition in decades, and given the significant momentum in the multifamily and retail sectors, the outlook for this development is positive. "There are strong opportunities in all of these markets, though in Downtown the focus appears to be on repositioning, following the success of projects like Pac Mutual and given the significant amount of historic assets available for newer and better uses."

Martin D. Agnew, VP investments in Marcus & Millichap's Encino office, tells GlobeSt.com the Downtown Los Angeles, Mid-Wilshire, South Bay and West Los Angeles submarkets will receive the majority of speculative-office buildings through 2016. "In all, more than 2 million square feet of space is under construction, with less than 50% of the building pre-leased."

Steinhardt says Orange County has experienced an impressive rebound in occupancy and values, and spec office is on the horizon. "Entrepreneurial demand drove the early recovery in the South County market, while the area near John Wayne Airport has followed. The planned spec development at 520 Newport Center will likely set the high bar for rents. The pipeline of proposed projects in OC is significant and concentrated in Irvine. If the Spectrum project is unconstrained, rental growth rates may slow in that area."

Tom Bak, senior managing director of Trammell Crow Co. and overseer of TCC's Southern California development and investment teams, adds that in Orange County, the Irvine Business Complex, Irvine Spectrum and Newport Center are seeing new office development and are attracting top-tier tenants.

Michael Lawrence, SVP investments in M&M's Newport Beach office, tells GlobeSt.com that the Source is another spec-office development located in the Orange County's North County submarket within the Buena Park/La Palma area.

Ben Tashakorian, first VP investments for Marcus & Millichap in San Diego, tells GlobeSt.com Downtown San Diego is leading the charge in that market overall, with the La Jolla, Golden Triangle and Del Mar submarkets thriving most. "What's interesting is the number of new developments along the 1-5 Corridor submarket in Carlsbad. This submarket is really gaining momentum with assets trading hands at over $300 per square foot."

Steinhardt says San Diego could be the surprise, with strong demand and a constrained pipeline. "We are cautious regarding markets with single-tenant concentrations, such as Sorrento Mesa with Qualcomm and areas dominated by biotech, since the risk is elevated. But the reallocation of the Navy and emergence of Downtown San Diego present interesting opportunities. Healthcare and some military-related sectors seem to be firing on all cylinders as well. The lack of speculative construction in San Diego may be an opportunity, but developers have to think about delivering something special and unique."

Stacy Meronoff, leasing director for Cruzan, tells GlobeSt.com the draw of UTC, Sorrento Mesa, Del Mar Heights can be attributed to their central location, biotechnology clusters, steady net absorption over the years and proximity to decision-maker housing. "Downtown is attractive for its vibrant location, density of Millennial housing, access to public transportation, walkability and its vast array of amenities. It's also notable for its innovation in urban planning to create an environment that blends work and social life."

Lauren Kelly, SVP and chief marketing officer for the Irvine Co., tells GlobeSt.com her firm is building spec office in both Orange County and San Diego. She tells GlobeSt.com, "We recently opened world-class high-rise buildings in Newport Beach and La Jolla and are under construction of a high-rise in Irvine Spectrum. We are also building campus office in Eastgate and continue to look at future development opportunities in Orange County and San Diego."