The Office Reset is Working
Chris Drzyzga, SIOR
Orange County’s office market has not returned to the old normal, and that is probably a good thing. The market has been forced through a necessary reset, and the result is a leaner and increasingly stable office environment.
The theme I have written about previously — the market’s “controlled demolition” — has continued to play out in a meaningful way. More than 6 million square feet of office inventory has been removed from the Orange County office base through demolition, conversion, or acquisition by owner-users. That represents approximately 6% of the county’s total office supply. That is notable and represents a structural reduction in inventory.
Just as important, the tenants that previously occupied those buildings did not disappear. They were displaced back into the market and forced to find new homes. That dynamic has helped absorb higher-quality space and reinforce the flight-to-quality trend that has defined the office sector over the past several years.
While headline vacancy rates still point to a market with challenges, the high end of the market is telling a different story. The overall office vacancy sits at approximately 17.6%, yet the Class A segment is only approximately 8% vacant. The Irvine Company’s portfolio, arguably the county’s premier office portfolio, is approximately 3% vacant.
Demand has not disappeared. Tenants are still using office space, but they have become more selective. The market is rewarding relevance and penalizing obsolescence. That is a healthy development.
It is also happening in one of the most desirable markets in the country. Orange County remains a preeminent location to live, work, invest, and build a business. The office market is benefiting not only from inventory reduction, but from the broader economic strength and development activity taking place across the region.
Major projects such as OCVibe, Dana Point Harbor, Related Bristol, the Great Park in Irvine, Westminster Mall, and the residential conversions at Fashion Island are reshaping how people experience Orange County. These projects represent billions of dollars in long-term investment across housing, entertainment, hospitality, retail, employment, infrastructure, and lifestyle.
At the same time, the county’s economic base continues to deepen. Aerospace and defense companies such as Anduril and SpaceX are expanding their presence and helping stimulate entire sectors of the economy. Technology companies connected to the artificial intelligence revolution are also strengthening Orange County’s position as a hub for innovation, talent and high-growth business activity.
A shrinking inventory base, continued flight to quality, major private investment, and a diversified innovation economy all point in the same direction: Orange County’s office market has stabilized and is beginning its next cycle.
For tenants, this remains an attractive window to secure quality space on favorable terms.
For owners, the message is equally clear: the market is improving, but only for assets that remain relevant.
