Demand Remains Strong in Orange County

The metro’s recent office construction boom, which added almost 2 million square feet to the inventory last year, has had a significant impact on rental rates and investment volume, which are on the rise.
Office-using employment in Orange County, click to enlarge
Office-using employment in Orange County, click to enlarge

Orange County’s economy has been growing at a steady pace throughout the last four quarters, despite the divide between the low-paying hospitality and leisure sector and the high-paying profes­sional and business services sector. The recent office construction boom, which added almost 2 million square feet to the inventory in 2017, has had a significant impact on rental rates and investment volume, both of which are on the rise. Vacancy, however, remains at a low 11.5 percent, driving up demand, in tandem with the market’s afford­able average asking price per square foot, $33.62 as of May.

A tight job market, with unemployment around 3 percent, has also been putting pressure on developers. The metro added roughly 30,000 office-using jobs during the 12 months ending in April, with the professional and services sector benefiting from 13,400 new jobs. Booming construction activity in the multifamily, hospitality and office segments will continue to fuel growth in this sector. The education and health services sector has added 9,600 jobs and expects to grow further, as several medical centers, including City of Hope, are in the pipeline. The information sector, however, has lost 100 jobs.

Co-working is on the rise in Orange County, with Spaces and WeWork opening their third and second locations, respectively, in Irvine Spectrum and Costa Mesa.

Read the full Yardi Matrix report.