As the slowing economy turns the local office market into one that increasingly favors tenants, there also appears to be more notable sublease opportunities in Orange County.
Several companies have listed part of their local office base for sublease, brokers tell the Business Journal.
Those firms aren’t necessarily contracting their local operations; many companies continue to be in a wait-and-see mode in the wake of COVID-19.
“Most tenants are still uncertain when looking at their existing lease,” said Bob Thagard, executive managing director of the Irvine office of Cushman & Wakefield.
Thagard notes that a few “big blocks of office space” have been on the market for some time, from notable companies including Hyundai Capital America, Acorns, BlackBerry Cylance and Vyaire.
The four companies have a local office presence spanning north of 500,000 square feet; the exact number of square footage up for grabs is uncertain.
All four lease opportunities are in Irvine.
Flexibility
A recent JLL market report notes that while Orange County “has not yet experienced a flood of space, sublease availabilities 10,000 square feet and greater are ticking up.”
The brokerage notes that since mid-March, 302,215 square feet has been added to the market with 46% being listed in June.
“This rise in sublease space combined with 1 million square feet of office under construction is increasing competition among landlords to attract tenants.”
As existing master tenants weigh their options with their current office space, a sublease can provide more flexibility for those looking for shorter-term deals.
Landlords “don’t want to lose tenants in today’s market,” Thagard said.
It’s not uncommon for up-and-coming firms to sign leases for far more space than they need immediately, and then sublease a portion of that space until it’s needed; Irvine’s Anduril Industries, now with a valuation approaching $2 billion (see story, page 1), made such a move last year with Viant Technology for a portion of its 2722 Michelson Drive headquarters.
A similar move appears to be taking place at Acorns, which is said to be looking to sublease a portion of its headquarters, a 91,100-square-foot four-story office at Irvine Co.’s UCI Research Park office campus in Irvine.
The nearly $1 billion-valued fintech firm moved into that space last year, and has reported recent growth in its user base.
Amazon Lease
Just as brokers have not yet seen any impact to transaction pricing in the recent market downturn, there haven’t been significant changes to rents, notes Thagard, with some office tenants still looking to make deals.
Amazon, for example, is making deals on the office front as well as the industrial.
Shortly after making local headlines for potential plans to build a last-mile logistics facility at the former campus of Mitsubishi Motors North America Inc. in Cypress, the company has renewed its office lease in Irvine.
The company will stay on as a tenant for 20 and 40 Pacifica, leasing 22,937 square feet and 112,490 square feet, respectively, for a deal totaling nearly 135,500 square feet.
Terms of the lease were unavailable.
