Orange County Office Market Strengthening Due to Millennials, Creative Office
One of our speakers at Connect Orange County on July 22 is Bill Halford, the president and chief executive of Bixby Land Co. His firm focuses on the development of office assets in California that cater to the addition and retention of a talented workforce. Halford recently took time to talk to us about how the Orange County office market is performing and how creative office and Millennials are impacting this commercial real estate sector.
How is the Orange County office investment and development market shaping up right now?
The investment climate is very active, and people are pretty enthusiastic. Every market in the county is doing well. There is lots of active trading, rents are going up and vacancies are down, so people are pretty enthusiastic about that. But many investors want to know if we are near the end. A lot of people are wondering if it’s too good to be true.
But Orange County is bouncing back after a tough recession. Why is that?
The market in Orange County hasn’t been great, but it’s been steadily getting better for four years. Now a lot of landlords will say that it is great. There is a lot of pricing power and low vacancy and values appreciating.
Is creative office a factor in Orange County? You usually hear about it in more urban markets.
We have four projects that are either under construction or leased. It’s a phenomena that is more prevalent in high-rent markets where people are willing to pay more. It’s really any place that has high-paid employees. It’s prevalent everywhere other than low-rent markets.
How does that impact how you do business?
We’ve been doing it for six years, and having an interest in that type of product is good for everybody. We get more competitors than we used to have, but that’s concurrent with an increasing interest in that kind of space.
What are your thoughts on office owners catering to Millennials?
What’s driving this is the increasing need and desire for fast-growing employers to create a better and more interesting environment for their employees because they have to compete for that talent. That’s been the genesis of this whole creative movement. I don’t think it’s a fad. Increasingly, the kinds of companies we see tend to be service firms that tend to be driven by talented employees. Those employees have an option of where they want to work, and they want an interesting work environment. I don’t see that changing. Today, the company is the employee. If you don’t get the best employees, you’re not going to win.
How do you see Orange County shaping up over the next year in the office sector?
The economy is likely to be strong for the next couple of years. There is very little new product that can be brought to market in that time frame. You’re going to see rents continue to grow and favor the landlord until we either have an economic downturn or new development comes to market, which is about three years away. It’s going to be a good run for a couple of years and how long is a function of how much new product is built combined with how strong the economy performs.