We recently filmed a series of videos with Synergy’s own Terri Chaklos highlighting office space in Orange County. Today we’re posting the video we shot for Anaheim.
If you would like to see more videos about Orange County, subscribe to our YouTube channel. We’ll be posting more shortly.
Video Transcript:
…
The Orange County industrial market bumped along the edge in the fourth quarter, after struggling throughout most of 2010.
Net absorption was positive at 314,457 square feet, although the gains were not enough to bring the year-end net total into positive territory, finishing at negative 667,514 square feet for the year. The vacancy rate finished the fourth quarter at 7.7%, unchanged from the third quarter and higher than the 6.9% rate reported one year ago. The average asking rent in the market slipped to $0.52/sf/mo in the quarter, compared to $0.53/sf/mo in the third quarter and $0.59/sf/mo one year ago.
For more information about industrial space, contact us today.
During the economic downturn, Orange County’s economy has been bolstered by a boom in “green” companies that have chosen the area for its great climate, affordable rents, enticing tax-breaks and rich tradition in aerospace and engineering.
The number of green tech jobs in the county currently numbers around 20,000 and is expected to grow at a rate of 5 percent per year as more than 300 green companies have already established a presence in the OC. The growth numbers could go even higher with new businesses and corporate relocations from LA, San Diego and other major cities. In addition UC Irvine has become a hub for green energy programs and has become a renowned center for advanced research.
If your business would like more information about establishing a presence in Orange County, contact one of our tenant advisors today.
When businesses contact Synergy about helping them find office and commercial space, one of the more common phrases I hear is, “We want the best space at the best price.” But getting the best space for the best price is a balancing act between three factors: Location, the Lease itself and Layout. I refer to them as the 3 L’s and each one plays a major role in the overall process of ultimately leasing or purchasing space.
Location is the first factor and affects prices not only in terms of lease rates but also in expenses that you may not realize. For instance if you move offices, how many employees will you lose because of increased commute times? Will you have to negotiate a mileage allowance if you move further from your employees to save money? Will you be able to save money with lower wage costs?
Leasing is the second major factor and this is the area where having a tenant rep will save you the most amount of money. Landlords will almost always draft the first version of the lease (in their favor) but nearly every component is negotiable. Choosing to negotiate a lease without a tenant rep could cost you in the short and long-term because I know what I can get in terms of free rent, lower rates and other concessions and I know how to structure provisions that if left untouched could leave your business on the hook for expenses and fees that could have been avoided or negotiated down to acceptable rates.
The third factor that will affect the price of space is the actual layout. Businesses are now allocating fewer square feet per employee and trying to implement open layouts that reduce their overall footprint but choosing how much space you need requires an understanding of efficient design, standards and construction management. If 5,000 feet can be reduced to 4,500 feet with no ill effects, you essentially save 10 percent which over the term of a lease is a huge amount of money.
Blizzard Entertainment, the game developer best known for World of Warcraft, Diablo and Starcraft, has just signed a major expansion for their studio in Irvine. The company’s current facility includes around 235,000 square feet of space located along Alton Parkway and the new deal adds another 100,000 through adjacent buildings.
The company is preparing to release a new expansion for their World of Warcraft series and their most recent release, Starcraft II, has sold more than 3 million copies. The company employs more than 4,500 people and maintains offices in California and France.
For the first time in over four years, the quarterly vacancy rate for Orange County office space dropped as a result of a decrease in new available space but overall leasing activity actually declined. The percentage of space available for rent was down by nearly 5 percent from its peak in 2009 to 21.8 percent.
The best analogy for the contrasting data is to go back to January when GDP growth hit 5.7 percent based on an inventory slowdown. Orange County saw a decline in vacancy rates by 0.4 percent but it was still 1.3 percent higher year-over-year. Leasing activity in Q3 fell by 100,000 square feet compared to Q2 data.
As a result of continuing weakness in the market, rents fell and were down more than 10 percent year-over-year.
Best performing communities (based on vacancy rate):
- Dana Point, La Habra and Fullerton
Worst performing communities (based on vacancy rate):
- Foothill Ranch, Anaheim Hills and Placentia
Throughout the current economic situation, many businesses in Orange County and throughout country have had to re-evaluate how they allocate and use commercial space.
This trend is not news to those of us who represent tenants in office leases but it serves as an interesting reflection point on how we, as tenant representatives, adapt to serve the shifting space needs of our corporate clients.
Today Corporate America is focused on cost effective solutions to reduce real estate expenses as well as looking for new ways to utilize real estate to increase productivity and attract the best human capital to their organizations. For most companies the three largest costs incurred are the people, real estate and technology and if a company can optimize all 3 areas then it will be in a better competitive position.
In the past, businesses made real estate decisions based on financial and operational objectives and our job was to get a handle on their client’s space requirement, identify their best options in the marketplace, create competition for their client’s tenancy and negotiate the best deal possible.
Successful tenant representatives knew the market’s inventory and were effective negotiators who would find space at a location the CEO liked and negotiate a price the CFO could agree upon. Along the way we had to educate ourselves about office space design, office furniture, fiber optic telecommunications and managing construction costs.
What’s different today is that a skilled tenant rep’s knowledge base extends beyond real estate and construction to include technology and human resources. Three important factors changing the workplace today
Progressive Workforce: Today’s workforce primarily encompasses three generations Boomers, Gen-X and the newly arriving Millennial who comes to the workplace with a different mindset. The shifting demographics of the workforce are changing how companies design and use their space with a trend towards more open collaborative environments.
Technology: The pace at which technology evolves is almost mind blowing and it’s having an impact on how we use development of technology and advancement in communications.
Sustainability: Not only are corporate clients more motivated to be better to the environment, they are recognizing sustainable workplaces are not only cheaper to operate than traditional buildings, but also important in attracting employees and the overall impression a company wants to present
Tenant representation is no longer an exclusive term. Today’s advisors are workplace consultants who look beyond the client’s space needs and consider the client’s core business to form a contextual analysis of each client.
Many businesses in Orange County believe that when it comes to their current lease, they have to accept the terms until the lease expires. Businesses that signed long-term commercial leases during the economic peak may find themselves paying a 20 percent premium over current market rates without any idea of how to change it.
Most landlords, contrary to popular belief, are willing to renegotiate leases to market rates assuming that the tenant can present a compelling case that adds value to both parties. Tenants obviously need to reduce rent to cut expenses and increase profit while landlords need income and want to keep tenants if at all possible. With the area’s high vacancy rates, losing a tenant can mean that space will go unoccupied for an extended period of time and the opportunity cost to inflexible landlords is prohibitively high.
There are some landlords that won’t renegotiate terms because they cannot afford a short term decrease in revenue and some landlords don’t renegotiate simply on principle. However if you’re willing to commit to an additional term at your current location, most landlords will be happy to hear your proposition.
If you find yourself in a situation where you need to reduce your rent, contact our Orange County office and we’ll be happy to look at your current lease and put together a proposal that can save you money while providing value to your landlord.