Why Function Beats Style in OC Office

“Creative office” has become the—somewhat clichéd—mantra of the office sector. While some are eschewing the term “creative” as banal and overused, it is undeniable that open, design-forward spaces with amenities, common areas and food and beverage options have been hailed the future of office. In Orange County, however, the trend hasn’t taken off. Of course, creative office has a presence in the market, but just north in Los Angeles, creative office is driving market activity. In Orange County, on the other hand, tenants seem to favor functionality and location over design trends and prestige.

“Los Angeles tends to be more cool, hip and trendy,” Jeff Ingham, senior managing director at JLL, tells GlobeSt.com. “In Orange County, tenants don’t care as much about the address or the space. You might have some tenants that want a certain view or they want to be in Fashion Island, and they don’t care what the rent cost is. The bigger driver here, however, is where is the office is compared to where the employees live and what is the cost is, especially if it is a small business. Tenants are more concerned with functionality, location and access as opposed to being in the coolest building in the coolest market.”

Although creative office isn’t as prevalent in the Orange County market, newer well-maintained, modern spaces do win tenants. For landlords looking for opportunities to drive leasing, building upgrades and value-add strategies are the best bet. With a large stock of older properties, there are value-add opportunities for office investors. “Landlords should focus on what they do, and do it well. The reality is that rents aren’t going to spike, so there is no reason for landlords to hold space on the market,” adds Ingham. “There is no guarantee the market is going to drop, but it is not likely to increase. Landlords need to act and react quickly because the market is changing faster than it has in the past with all of the new investment. The entire market is changing.”

One of those changes is the migration of tenants to new markets. Ingham has noticed that many tenants leaving the airport area—where there are several large floor plates vacant—are moving to the Irvine Spectrum market. The extra supply in the airport area will have an inevitable impact on lease rates throughout Orange County, but the sublease market has remained in check, and that’s good news for landlords. Where there is sublease space, tenants are still favoring newer, modernized spaces. “I am seeing more sublease space, but there isn’t an over abundance of sublease space, like we have seen in the past. I don’t see that happening now,” says Ingham. “Tenants want new, modern space. If you are subleasing space older space or un-renovated space, it is more challenging.”