Orange County Office Sublease Availability Declines
According to a recent office report from JLL, tenants continue to leverage flight-to-quality opportunities.
ORANGE COUNTY, CA—Orange County started 2024 with an unemployment uptick in the first quarter, according to a recent office report from JLL. More than 2,000 payrolls were eliminated in office-using industries during the first two months and along with job cuts, leasing volume declined 10% quarter-over-quarter.
Their report notes that tenants in financial services and professional and business services sectors were behind most of the new leases during the quarter with net absorption in Orange County remaining negative in Q1.
According to Chi Qi, JLL Senior Research Analyst, the highest amount of negative net absorption was concentrated in Irvine. “A tech and a healthcare tenant contributed to the most space give-backs during the quarter,” she says. “Despite these two sublease additions, the overall sublease availability has declined for three consecutive quarters in the county.”
One notable sublease signed in Q1, according to Qi, was by an electronic manufacturing firm, which relocated their office employees from a warehouse they occupied in Anaheim to The Flight in Tustin, one of the most prestigious office campuses in the Airport Area, highlighting the ongoing trend of flight-to-quality.
On the supply side, the office report notes that converting obsolete office products to other property types continued. “During the quarter, the industrial redevelopment on the site formerly known as Elevated@Harbor has broken ground, and the demolition of Inwood Park also commenced to make way for a proposed manufacturing facility on the site,” the report says.
According to Qi, when looking ahead, with the moderation in industrial demand since late 2023, and with industrial rents falling off from the peak in Q1 2024 combined with the rising construction costs, office to industrial conversions could be increasingly difficult in the near future.