Orange County’s office market just managed to make a list of the most important regions for high-tech companies in the U.S, according to a new brokerage report.
OC was included in Los Angeles-based CBRE Group Inc.’s “Tech-Twenty” list of the 20 “most influential high-tech-oriented cities” or office markets in the U.S.
The report, released last week, notes that the U.S. high-tech economy has grown nearly six times faster than the national average, “fueled by demand for mobile, search, social and cloud computer software and service technologies.”
High-tech service jobs have grown nearly 10% between 2009 and mid-2012, compared with 1.7% growth for nonfarm jobs over that time, on a national basis.
For the markets listed on the Tech-Twenty, the “concentration of key high-tech services sectors within these cities is driving both economic and office market performance,” according to the report.
Job growth in each of the 20 markets—and the performance of their office markets—vary sharply, based on a reading of the report’s data.
Northern California’s office market stands near the top of the rankings, with San Francisco’s South of Market district and the Silicon Valley placing No. 1 and 3 on the list, respectively, with New York City listed as No. 2.
Orange County’s office market ranks last of the 20 regions listed in CBRE’s report, just below Los Angeles and Philadelphia. San Diego’s office market placed No. 15.
OC is the only market of the 20 that shows negative job growth for high-tech services since 2009, with a drop of 2%.
The local office market also turned in the lowest performance on rents, with a decline of 7% over the past two years.
SOMA
San Francisco’s South of Market district has seen 41% job growth for high-tech jobs, and 44% rent growth, over the same period, according to the report.
“Los Angeles, Philadelphia and Orange County have some pockets of high-tech growth, but not enough to keep their office markets from struggling,” the report said.
San Francisco’s ranking appears to have benefited from having its South of Market district assessed as a distinct market.
Orange County saw a similar cluster become a negative factor in its ranking.
A bulk of the region’s high-tech positions are clustered in South OC, but the report uses the entire county’s office sector when factoring its ranking, according to Kurt Strasmann, senior managing director for the OC operations for CBRE.
“It’s a favorable report for South OC, but that’s a relatively small submarket within Orange County” making up about 15% of the region’s total office and flex space, Strasmann said.
Case in point: Areas such as University Research Park in Irvine, home to chipmaker Broadcom Corp. and others, count vacancy rates under 10%, well below the roughly 16% vacancy rate seen in OC’s office market at large.
Space has grown tight enough at University Research Park to prompt landlord Irvine Co. to consider moving operations of its own retail, office and apartment divisions from property it owns in the area to a new 19-story office building it plans to build in Newport Center starting next year.
Newport Beach-based Irvine Company also is considering building three additional 89,000-square-foot offices in University Research Park, whose buildings total about 2.5 million square feet. No time frame has been disclosed for the proposed construction, according to city records.
Strasmann said OC’s office market stands to see gains on par with other markets on the Tech-Twenty list over the next few years, as tech companies in Northern California look to expand elsewhere in the state.
“The Googles and Apples of the world are not going to relocate, but if they expand, OC is well-positioned, along with San Diego and L.A.,” Strasmann said.
Mountain View-based Google Inc. is one area tenant office brokers are keeping an eye on for a possible expansion. The company leases a little under 40,000 square feet of space at Scholle Center office campus along Jamboree Road in Irvine, according to CoStar Group Inc. data.
The company has been rumored to be eyeing as much as 150,000 square feet of space as its current lease expires, and could be exploring having a stand-alone office built for its Irvine operations, according to brokerage sources.
