Orange County commercial sales and leasing activity grew in 2018 for the ninth year in a row, albeit at a slower clip than the prior year.
The region’s top 18 commercial brokerage firms handled about $31.5 billion in deals in 2018, up 5% year-over-year. While much less than 2017’s increase of 17%, ongoing low interest rates are keeping sales activity strong, while tight vacancy rates in OC continues to push demand for new space, local brokerage executives said.
The Business Journal’s annual list ranks area brokerages by the dollar values of their commercial property and land deals done in OC last year, as well as those done elsewhere that were handled by the local office.
Only five of the brokerages on this year’s list reported year-over-year declines, with the overall number of reported lease transactions surged nearly 20%. Meanwhile, sales volume was up 9%.
There were 765 OC brokers as of February, flat from the prior year, and 1,227 OC employees, up 2%.
Modest growth is expected to continue in 2019, according to Newmark Knight Frank Executive Vice President Greg May, due to a slowdown in job creation “amid a tight unemployment rate.”
“Fewer new jobs generally correlates to flat demand for commercial space, but several sizable leases signed this year with expected move-ins in the coming quarters will keep the market on firm footing,” May said.
Newmark surpassed Colliers International coming in at No. 2, with $3.9 billion in work, up 12% from last year, led by a 27% jump in leases.
Notable deals for the company’s capital markets team last year included three area office sales over $100 million: the $157 million sale of multiple buildings at the Summit Office Campus in Aliso Viejo, its $147 million sale of City Tower in Orange, and the $107 million sale of the two-building Atrium complex in Irvine.
Those three deals included local and national buyers, and a mix of those two types of buyers, along with foreign money, continue to make OC a hotbed of commercial real estate investment, May said.
“Strong demographics and rising household income have continued to attract a healthy amount of foreign investment, primarily stemming from China, Canada, the Middle East and Europe,” May said, adding that Opportunity Zones “have created a new outlet for investment which will be seen widely in the next 12-24 months.”
Cushman & Wakefield ranked No. 4 on the list with $3.5 billion in activity and was involved in two of the largest OC office leases in 2018: Taco Bell’s 181,000-square-foot renewal at its Irvine headquarters, and Anduril Industries’ lease of the under-construction, 155,000-square-foot 2722 Michelson Drive, LBA Realty’s creative office building.
• Perennial No. 1, CBRE Group Inc., had $5.8 billion in transactions at its two area offices, up 5% from last year (see story, page 1).
• Rounding out the top five on the list are Colliers, down one spot at $3.6 billion, up 4%; and JLL at $2.4 billion, up one with a 24% increase.
• No. 8 Marcus & Millichap posted a 6.4% increase in activity to $1.7 billion, and experienced a record year despite “all of the uncertainty that circled the marketplace,” said Regional Manager Jonathan Giannola.
Bolstered by a low 10-year Treasury note, there is “plenty of capital searching for deals,” like “value-add opportunities in multifamily, retail and industrial product types in Orange County and the surrounding area,” he said.
Tenant Reps
The area’s top brokerage that exclusively represents tenants in leases and sales, Savills, has dropped the “Studley” from its name in a rebranding that comes about two years after its acquisition of Cresa Orange County.
The two firms came under the same roof last February when it moved into a full-floor, 19,000-square-foot space at 520 Newport Drive, where it has about 55 employees.
Savills, which primarily services office and industrial clients, comes in at No. 12 on this year’s list with $920 million in 2018 sales and lease transactions, up 8% from the year prior.
Royce Sharf founded the Studley Orange County office in 1989, and the firm was acquired by London-based Savills in 2014. The rebranding aims to emphasize the office’s growing roster of clients that have an increasingly global presence in Europe and Asia, according to Sharf.
“It’s an easier to understand brand that represents the global behemoth that is Savills,” Sharf said.
Similar to Savills’ vision for its new OC office, tenants are increasingly looking for creative, collaborative centers with equitable office space, Sharf said.
Every Savills’ office, for example, is the same size and conference rooms replaced corner offices.
Companies are also densifying, fitting more employees per square foot, which could create a potential parking issue, Sharf said.
What can we expect from Savills in the next three years? Growing its industrial and retail segments and adding new product lines for clients.
“We’re always looking to hire talented individuals, but we aren’t growing just for the sake of growing,” Sharf said.
