2019-07-11_DTZ戴德梁行_Office_Q4_2018_Orange_County_4页_659kb

Orange County Office Market Summary Q4 2018

Core Content

Orange County's office market experienced mixed performance in Q4 2018, with notable trends in employment, vacancy, net absorption, and rental rates. The market also saw significant leasing and sales activity, which influenced overall market dynamics.

Economic Indicators

• Orange County Employment: Increased slightly from 1.63M in Q4 17 to 1.64M in Q4 18.
• Unemployment Rate: Declined from 3.3% to 2.9%, lower than both the state (3.9%) and national (3.7%) averages.
• Industry Trends: Professional and business services added the most jobs in 2018 (7,100), while government reported the largest year-over-year decline (5,600 jobs lost).

Market Overview

• Vacancy Rate: Increased to 11.5% in Q4 18, up 40 basis points year-over-year.
• Net Absorption: The market posted 296,587 sf of positive net absorption, with four of five submarkets contributing positively.
• Rental Rates: Overall asking rents rose to $2.97 psf/mo, a 12.1% increase year-over-year. Class A rents were higher at $3.34 psf/mo.
• Construction Activity: Over 1.1 msf of new construction is expected to complete in 2019, with Irvine Spectrum and Tustin leading the pipeline.

Submarket Highlights

• Irvine Spectrum: The highest grossing submarket with $3.73 psf/mo. Overall rents increased nearly 38% over two years.
• Newport Beach: Second most expensive submarket with $3.39 psf/mo.
• South County: Led the market with 770,725 sf of positive absorption, driven by major move-ins from Broadcom, Cylance, and Metagenics.
• Greater Airport Area (GAA): Recorded a negative absorption of -644,422 sf, largely due to new construction not yet filled.

Key Lease Transactions Q4 2018

• SkyWorks: Renewal/Expansion of 217,780 sf at Irvine.
• Taco Bell: Renewal of 181,482 sf at Irvine Spectrum.
• Glaukos: New Lease of 165,028 sf at Aliso Viejo.
• AltaMed: Sublease of 90,533 sf at Anaheim.
• AECOM: Renewal of 73,908 sf at Orange.
• Edwards Life Sciences: New Lease of 62,216 sf at Costa Mesa.
• MACOM: Renewal of 57,412 sf at Newport Beach.
• Best Choice Products: New Lease of 51,065 sf at Tustin.

Key Sales Transactions Q4 2018

• One Pacific Plaza (Huntington Beach): Sold for $124.5M, or $324 psf, by Prudential Financial to Ares Management.
• Arena Corporate Center (Anaheim): Sold for $125.5M, or $327 psf, by Arena Corporate Management to Miramar Ventures Partners.
• AXIS Anaheim (Anaheim): Sold for $83.1M, or $276 psf, by The Seligman Group to Goldman Sachs.
• The Hive (Costa Mesa): Sold for $84M, or $457 psf, by SteelWave to Invesco.
• Main Corporate Center (Irvine): Sold for $46.6M, or $348 psf, by Hines to GLL Real Estate Partners.
• The Village Business Park (Buena Park): Sold for $22.33M, or $158 psf, by Westcore Properties to Stanton Road Capital LLC.

Outlook

• Rent Growth: Expected to slow in 2019 as existing landlords compete with newly constructed buildings.
• Absorption: Projected to regain momentum in 2019 with tenants occupying new space in the first half of the year.
• Construction: Over 1.1 msf of new construction is expected to complete in 2019, with Irvine Spectrum and Tustin seeing the most new product.

Market Trends

• Leasing Activity: Gross leasing activity totaled 8.2 msf in 2018, a 7% decrease year-over-year. Renewals dominated with over 1.9 msf.
• Investor Activity: Sales activity saw a healthy increase in Q4 2018, with 2.0 msf trading to investors.
• Submarkets: South County and Irvine Spectrum were the most active in terms of leasing and absorption, while the Greater Airport Area faced challenges due to new supply.

Key Statistics

Summary of Market Performance

• Positive Net Absorption: 296,587 sf for the year, with South County leading.
• Vacancy Increase: 40 bps year-over-year, primarily due to new construction.
• Rental Growth: Overall asking rents rose 12.1% year-over-year, with Class A leading the increase.
• Major Leasing Activity: Renewals and expansions dominated, with SkyWorks and Taco Bell among the top leasing transactions.
• Sales Activity: Healthy increase in Q4 2018, with notable sales in Huntington Beach and Irvine.

About Cushman & Wakefield

Cushman & Wakefield is a leading global real estate services firm with a presence in 70 countries and 400 offices. It provides services including property management, leasing, capital markets, and valuation. The firm has 48,000 employees and reported $6.9 billion in revenue in 2017. For more information, contact Eric A. Kenas or Mark Williams.