As anticipated, the Orange County office market was sluggish during the first quarter of 2021, particularly for smaller spaces of less than 10,000 square feet. However, activity is picking up during second quarter, primarily due to lower COVID counts and vaccinations opening to everyone older than 16. 

“We are specifically seeing this with active requirements and tenant activity with tours picking up, which is expected to continue through the balance of the year,” says Jeff Ingham, JLL senior managing director. “The vast majority of requirements are reduction of existing locations. If they are relocations, companies are primarily focused on sublease alternatives. Leasing/touring activity has been slow for direct relocations as compared to sublease activity, as tenants are primarily focused on top-quality furnished or plug-and-play sublease alternatives. Direct leasing activity has been focused on new high-quality low-rise projects with large leases signed by Anduril and Costar as specific examples.” 

Low-rise leasing activity has outpaced high-rise at a ratio of 5 to 1, says Ingham.

“High-rise office space with paid parking is being labeled as commodity space in the current market,” he says. “What is unique at this point is that sublease activity is not only driven by companies looking to save on rent, but also large Fortune 500 companies that are looking to 1) reduce capital required to move and 2) commit to shorter lease terms as they solidify their occupancy strategies.” 

Asking rental rates have remained stagnant in the current market, primarily driven by a low velocity of transactions. That being said, current leasing activity is seeing significant concessions both financial and nonfinancial with free rent, signage and the like, Ingham points out.