Office leasing isn’t one of those industries.
“Leasing activity has been largely stalled in the past year save for a few mega-deals,” said Royce Sharf, an executive vice president at Savills USA, the area’s largest tenant representation brokerage.
One such mega deal was Anduril Industries’ lease at The Press development at the former LA Times printing facility in Costa Mesa.
The lease is for 640,000 square feet, including 450,000 square feet that’s currently under construction, as well as a newly planned 190,000-square-foot research and development building. It’s among the largest office leases in OC’s history.
Anduril, a tech-focused defense and border protection company founded by Palmer Luckey, is slated to move into the project by summer 2022.
“It’s a game changer for Orange County,” said George Thomson, a senior managing director at Newmark.
Thomson, who along with colleague Jay Nugent brokered the lease on behalf of the landlord, a joint venture between Foster City-based SteelWave LLC and Dallas-based Invesco Real Estate.
“It’s going to be a cool employment hub featuring both hardware and software operations, and will create a wake effect that will attract additional companies to the area,” Thomson added.
Leasing Momentum
Newmark has several office deals in the works that speaks to future market momentum.
“It feels like we are on the precipice of seeing a surge in new leases over the next four quarters,” Thomson said.
This was echoed by Sharf, who predicts a “robust second half of this year.”
“There’s some pent-up demand in the market right now,” Sharf said.
OC’s Class A office market, totaling some 50 million square feet, counted a vacancy rate around 13.4% at the end of the first quarter, compared to 11.3% a year ago, according to data from Newport Beach’s Voit Real Estate.
Vacancy rates in the area around John Wayne Airport are higher—15.5%—due to the larger cluster of high-rises in the area, which have fallen out of favor the past year.
Irvine Co. Successes
Not all area landlords have sounded the alarm bells.
Irvine Co., with an office portfolio totaling 53 million square feet, the majority of it in OC, said it has managed to maintain strong leasing volume in the past year.
The area’s largest landlord said earlier this month it leased nearly 7 million square feet across its office portfolio between April 2020 and March 2021; 2 million of that total was inked in February and March 2021 alone. The company hasn’t disclosed April figures yet.
“Many customers say the workplace is more important than ever to foster collaboration, innovation and productivity,” said Steve Case, executive vice president of Irvine Co.’s office division. “A healthy and vibrant workplace community helps innovative companies create a winning culture and contributes significantly to growth, success and employee satisfaction.”
The landlord’s largest deal was for a full building at the company’s Spectrum Terrace office complex where real estate data firm CoStar Group Inc. inked a 115,000-square-foot lease.
Expect new deals to be made over the next year at Spectrum Terrace’s third phase, as well as at the company’s just-built Innovation Office Park, a collection of low-rise buildings in Irvine near the intersection of the Santa Ana (5) Freeway and Sand Canyon Avenue.
Private Workspace
Irvine Co. said it has received strong initial interest at Innovation Office Park, specifically for its relatively new office product, called Flex Workspace+, which offers turnkey workspaces with shorter-than-normal lease terms.
Initial demands for these flexible offerings were so strong, the company added an additional 10,000-square-foot floor at the new office park to be used for the Flex Workspace+ program, the developer said.
Sharf has noticed demand from tenants for smaller, private workspaces in the wake of COVID-19.
Architecture firm LPA was behind the design of Savills’ nearly 20,000-square-foot office in Newport Beach.
That was done pre-pandemic; however, the design has been fortuitous post-pandemic, with the perimeter of the office filled with private offices.
“Everyone has their own space, as well as several gathering areas that creates a collaborative atmosphere you can’t get from home,” Sharf said.
Both Newmark and Savills have been phasing their return back to the office, with a more formal reentry slated to begin next month.
“The return to office dynamic is taking hold in Orange County,” Thomson said.
