Orange County Office Outlook: Q&A with JLL’s Scott Wetzel

Commercial real estate’s office sector has continued to struggle post-pandemic with high vacancy numbers, particularly in metro areas. In a recent podcast interview, JLL Executive Vice President Scott Wetzel, one of the firm’s top tenant brokers in Orange County, discussed this phenomenon, the changing landlord/tenant relationship, and how asset owners and investors need to adjust.

Q: What are some initial thoughts about the last 2 1/2 years and the hybrid work model?

Wetzel: One important thing that has transpired is strong employee leverage. We were forced to work from home and we found out that we’re pretty good at it. When companies said “It’s time to come back”, employees pushed back, and the compromise has resulted in hybrid work. So while employers are determining as to what degree the model will be implemented, it’s irrefutable: Hybrid work is here to stay.

Q: What’s your perspective of the landlord/tenant relationship, given that Orange County office properties are only 30% to 50% occupied?

Wetzel: As a tenant rep, it’s been fun beating up the landlords a little bit. Tenants who are able to make longer term commitments are being rewarded with bigger TI allowances and free rent packages. Additionally, if you’re a new activated project like Spectrum Terrace that’s got high-end restaurants on site, fitness amenities and a pool, you’re getting a rent premium. Meanwhile, commodity projects, are stuck in the middle between tenants looking for premium spaces and those that are bargain shopping.

Q: What are some of the other things that tenants are finding attractive in office assets?

Wetzel: Urbanization has come to suburban office products in Orange County. The food scene has become very important, and complexes that bring top restaurants on-site are doing well. For example, the struggling Lakeshore Towers brought on Ten and Bosscat, and now they’re getting a bunch of new leases done. Live music is another popular amenity. 

Q: Has hybrid work and new employee amenity demands changed company strategies regarding multiple offices?

Wetzel: In the middle of the pandemic, as people moved from metro areas to suburban locations, many companies reacted by setting up satellite offices to accommodate those employees. In an effort to retain talent, companies have continued that model so as not to upset workers with long commutes to one centralized office.