OFFICE MARKET POSTS MOST TENANT GROWTH IN NINE YEARS
2024 Q4 OFFICE REPORT ORANGE COUNTY shows strong demand returned to the office market as 2024 posted the most tenant growth in nine years. The improved net absorption puts Orange County among the nation’s top performing markets and comes with an assist from employers ending hybrid working policies of the Covid lockdown.
There was 401,893 SF of net absorption in the fourth quarter, bringing total countywide growth to 1.1 million SF in 2024. Four of the county’s five submarkets reported healthy tenant expansion. Only the 44.4-million-SF Airport submarket – the county’s largest – was marginally negative for the year with 41,928 SF in the red but whose 17.1% vacancy rate was unchanged
It was the most countywide annual growth since 1.2 million SF of net absorption in 2015. It also was a major reversal from the negative 1.6 million SF of tenant contractions in 2023, the biggest annual loss since the Covid lockdown in March 2020. Fewer office tenants are relinquishing space upon lease expiration or ahead of it compared to recent years. Availability has declined, in part, due to second-hand space being leased, de-listed or expired. Sublease space absorbed in 2024 totaled 437,065 SF, the most on record in a single year.
Tenants have demonstrated a preference for new, amenity-rich creative office buildings. Developments completed within the past three years have gained nearly 2.5 million SF in tenant occupancy in the post-pandemic era. Buildings more than 25 years old lost nearly 5 million SF in occupancy.
The countywide vacancy rate fell in 2024, settling at 14.6%, down 40 basis points year over year. Vacancy rates ranged from 8.4% in West County to 17.1% in the Airport submarket. Full-service asking rents averaged $2.88 per SF for Class A buildings, which make up 45% of inventory. Class B rents averaged $2.53 per SF.
The 22.3-million-SF Central County submarket posted the most net absorption for the year, 443,925 SF. The county’s second largest submarket includes Anaheim, Fullerton, Placentia, Buena Park, Brea and La Habra.
The county’s largest commercial landlord, the Irvine Company, signed tenants to more than 1.8 million SF of office space in the second half of 2024.
Gaines Investment Trust of La Jolla paid $42 million for 2600 Michelson Drive, a 16-story tower with parking structure on 4.6 acres at the corner of Teller Avenue in Irvine. The LEED Gold building with EV chargers and a renovated lobby last traded in 2017 for $120 million.
Buyers paid $27.5 million for the 180,000-SF Tustin Financial Plaza, a five building, 50-year-old office project on east 17th Street, and are planning to develop multifamily on the 8.5-acre suburban site.
MARKET FORECAST
2024 Q4 OFFICE REPORT ORANGE COUNTY shows Orange County’s economy remains on a slowing yet still positive economic trajectory. Chapman University economist Jim Doti said in December that Orange County’s taxable sales will be flat in 2025 and the county population will fall by about 10,000 residents. He said residential sales will increase slightly in 2025 but prices will fall about 1%.
