Orange County has about 4 million square feet of office space coming to market over the next 24 months. If you add that to conversions and asset repositioning, there will easily be 5 million square feet of office product that comes online. How long it takes for this to be absorbed by growing office tenants is the true gamble.

GlobeSt.com: What submarkets in your region are being the most impacted by the current VC funding.

Lantgen: The Airport Area and Irvine Spectrum submarket have experienced the greatest amount of funding. We are seeing scaling businesses migrate from Orange County's tertiary markets to more core markets as they grow. Most businesses are founded near where the executive team lives, but as they grow they need to capture greater pools of skilled labor. Companies, like Cylance for example, relocated from the Irvine Spectrum, to the Airport Area. Other relocations include Alteryx relocating from Marketplace Center (West Irvine) towards the Airport Area as well. Greenwave Systems, has continued to grow and expand in the Irvine Spectrum. Both of these submarkets have a few things going for them: 1) sufficient office product conducive to scaling operations, 2) major freeway access to assist with capturing labor 3) new development coming online to assist them.

OC is very different than other markets in that most employees drive to work. Large projects that can offer above-standard parking and vacancy for future growth will always outpace standalone projects.

GlobeSt.com: What VC funding trends in your market will we be talking about at this time next year?

Lantgen: Going forward, we expect to see active funding for companies that are hyper-responsive to consumer markets and consumer needs. A few examples:

-Automotive R&D: Autonomous Vehicles and improving the driver experience is one area. Karma (formerly Fisker) and AutoGravity's recent leases in Orange County highlighting this trend.

-Augmented Reality / Virtual Reality: The consumer focus by AR/VR companies needs little explanation. Numerous local startups, such as NextVR, have received funding. The recent success of Pokemon Go clearly paved a roadmap for how to monetize AR. And now that headsets like Oculus' Rift and Sony's Morpheus are available for consumer purchase, we expect to see many more applications and many more startups enter this space.

-Semiconductors: Orange County has a deep history in this space (e.g. Broadcom moved its headquarters from Los Angeles to Irvine in 1995) with an abundant labor pool of skilled workers, so we expect job growth and VC funding to continue. The industry is also benefiting from the proliferation of Artificial Intelligence and the Internet of Things (IoT). Connecting your car to your garage door to the lights & locks in your home so they all work together is really the opportunity being chased here – it is a direct response to consumer demand for pragmatic technology. On the industrial side, its even greater.

-Cybersecurity: As long as there are banks, there will be thieves. As long as there is internet, there will be hackers. E-commerce, m-commerce, email, cloud networks, omnipresent WiFi… there are numerous opportunities for hackers both big and small, so the need for both consumers and businesses to protect themselves has never been greater. Companies like Crowdstrike and Cylance are industry leaders in our own backyard.

ORANGE COUNTY, CA—Orange County was recently ranked in the US Top 10 for High Tech VC Funding by JLL. The region's market fundamentals make it an optimal market to be the recipient of VC funding. Will that continue in the long term? Jason Lantgen, a VP at JLL, takes a closer look.

GlobeSt.com: How will VC funding impact office leasing in your market?

Jason Lantgen: The question for Orange County is whether leasing activity and absorption will keep pace with new supply coming to the market (e.g. 400 Spectrum Center Dr, The Bridges, The Boardwalk). Orange County's market fundamentals (i.e. skilled labor pool, quality of living, etc.) make it an optimal market to be the recipient of VC funding, both in the near term and the long term.

OC has a very concentrated skilled Labor Base (Bachelor's or higher) as well with Post Graduate Degrees compared to the entire West Coast or other “tech markets”. Secondly, the cost of the labor in Orange County is significantly less than other primary or secondary “tech markets” (anecdotally, Silicon Valley and San Francisco are about 2X that of OC). VC Funding will continue to flow to Orange County as long as there is innovation through direct funding or if a scaling company is looking for a cheaper market to hire and expand skilled labor, which we can go ahead and describe as indirect funding.

Orange County has about 4 million square feet of office space coming to market over the next 24 months. If you add that to conversions and asset repositioning, there will easily be 5 million square feet of office product that comes online. How long it takes for this to be absorbed by growing office tenants is the true gamble.

GlobeSt.com: What submarkets in your region are being the most impacted by the current VC funding.

Lantgen: The Airport Area and Irvine Spectrum submarket have experienced the greatest amount of funding. We are seeing scaling businesses migrate from Orange County's tertiary markets to more core markets as they grow. Most businesses are founded near where the executive team lives, but as they grow they need to capture greater pools of skilled labor. Companies, like Cylance for example, relocated from the Irvine Spectrum, to the Airport Area. Other relocations include Alteryx relocating from Marketplace Center (West Irvine) towards the Airport Area as well. Greenwave Systems, has continued to grow and expand in the Irvine Spectrum. Both of these submarkets have a few things going for them: 1) sufficient office product conducive to scaling operations, 2) major freeway access to assist with capturing labor 3) new development coming online to assist them.

OC is very different than other markets in that most employees drive to work. Large projects that can offer above-standard parking and vacancy for future growth will always outpace standalone projects.

GlobeSt.com: What VC funding trends in your market will we be talking about at this time next year?

Lantgen: Going forward, we expect to see active funding for companies that are hyper-responsive to consumer markets and consumer needs. A few examples:

-Automotive R&D: Autonomous Vehicles and improving the driver experience is one area. Karma (formerly Fisker) and AutoGravity's recent leases in Orange County highlighting this trend.

-Augmented Reality / Virtual Reality: The consumer focus by AR/VR companies needs little explanation. Numerous local startups, such as NextVR, have received funding. The recent success of Pokemon Go clearly paved a roadmap for how to monetize AR. And now that headsets like Oculus' Rift and Sony's Morpheus are available for consumer purchase, we expect to see many more applications and many more startups enter this space.

-Semiconductors: Orange County has a deep history in this space (e.g. Broadcom moved its headquarters from Los Angeles to Irvine in 1995) with an abundant labor pool of skilled workers, so we expect job growth and VC funding to continue. The industry is also benefiting from the proliferation of Artificial Intelligence and the Internet of Things (IoT). Connecting your car to your garage door to the lights & locks in your home so they all work together is really the opportunity being chased here – it is a direct response to consumer demand for pragmatic technology. On the industrial side, its even greater.

-Cybersecurity: As long as there are banks, there will be thieves. As long as there is internet, there will be hackers. E-commerce, m-commerce, email, cloud networks, omnipresent WiFi… there are numerous opportunities for hackers both big and small, so the need for both consumers and businesses to protect themselves has never been greater. Companies like Crowdstrike and Cylance are industry leaders in our own backyard.