REAL ESTATE NEWS

The Orange County office market is finally starting to turn the corner, now experiencing trends consistent with the rest of the U.S., according to a JLL report.

Specific to Orange County (OC), there are three main drivers reinforcing each other.

First, the return-to-office element, with clients expanding their existing office space, requiring three to four days of in-person work and enforcing the policy at levels we have not seen over the past five years.

Second, as companies are returning to the office, they are focused on Class "A" amenity reach or experiential office space to attract workers and tenants back to the office; this, in turn, is exposing how obsolete much of the Class B and C tertiary buildings have become.

Third, lower-quality office product transformations, which can no longer compete, coupled with state mandates for additional housing and rising residential demand, are reducing supply at the bottom of the office market.

In Q2 2026, Orange County saw positive absorption (493,429 square feet) for the third consecutive quarter. Move-ins during Q2 were concentrated in Irvine and the Irvine Spectrum area, with notable activity also occurring in Brea.

OC office leasing performance was concentrated in the Airport Area in Q2, which emerged as the leader in signing volume during the quarter.

"We are seeing values for residential land that are two to three times the value of the existing office buildings once it is re-entitled for residential," JLL Senior Managing Director Jeff Ingham said.

Ingham believes that the 15.2% vacancy rate in the report might realistically be overstated, as it includes buildings where the land use is in the process of being converted to residential but has not yet effected the change from a timing perspective.

"Once the shadow inventory in the market is accounted for, it will be substantially tighter than the numbers suggest, aligning with the three consecutive quarters of positive net absorption," he said.

Meanwhile, OC office development activity remained constrained, with only 168,137 square feet of office space currently under construction in the area.

Ongoing OC conversion projects are mainly removing Class B and C office space from inventory, reducing available space in the market and laying the foundation for stronger fundamentals.

Source: GlobeSt/ALM