Orange County Market Report: More Buyers Than Tenants

Topside Real Estate is pleased to provide you with this quick summary on the current small office building market in Orange County, California.
  • Office Market Size (5,000 – 20,000 SF bldgs): 55M SF
  • Vacancy Factor: 24.7%
  • Market Rent: $31.23/$2.60 FSG
  • Sale Price/SF: $310/SF
  • Available for Lease: 1.8M SF
  • Available for Sale: 88 Properties
    • Avge Price: $4.6M
    • Avge $/SF: $428/SF
    • Avge Cap Rate: 5.8%
    • Avge Occupancy: 42.8%

In March 2021, Topside Real Estate closed escrow on two small, vacant office buildings, a 4,950 SF BrenNexus office building in the Irvine Spectrum, and a 10,600 SF flex office building in the Irvine Business Complex. The smaller building sold to an investor/possible user at $420/SF, while the larger building sold to a user at $375/SF.

In concluding both sales, we noticed the following trends that we felt were worth mentioning:

  • The number of interested buyers outnumbered the number of potential tenants by a factor of 5:1. There are significantly more buyers looking to buy than there are tenants looking to lease in the small office building arena and that is reflected in the current sales market. In Orange County over the past 12 months, 61 small office buildings traded hands, with buyers being almost equally divided between Owner/Users and Investors. 
  • Buildings looking to achieve top of the market pricing are taking a lot longer to sell. For both of the properties we took to market, we priced the buildings in the top range of recent sale comparables. In doing so, we received acceptable offers within two (2) weeks of the properties
    being presented to the marketplace. Both buildings sold within 6% of their asking price.
    • For the 4,950 SF building, there are two comparable sales over the last 12 months for the same prototype building – $348/SF (23 days on market) and $422/SF (152 days on market). Competitive properties that are trying to get a premium price for their asset have spent at least 180 days on the market.
      • There are 2, 5,000 SF buildings in the same complex available for sale asking $440/SF and $460/SF that have been on the market for 81 days and 364 days respectively.
    • For the 10,600 SF building, there is one comparable sale on the adjacent street that sold for $264/SF to a user (14,768 SF). 
      • There are 4 properties for sale in the immediate vicinity between 10,000-20,000 SF that are asking premium pricing with a low of 164 days to a high of 536 days on the market.

Conclusion: Let Our Experience Work For You! 

As COVID cases taper off, and the market reopens, we expect tenant volume to increase.  In the interim, there are more tenants looking to buy than there are tenants looking to lease and a defensibly priced property can and will sell relatively quickly in this current market.

Topside Real Estate is available to provide an opinion of value or to assist in the sale of office buildings in Orange County. 

Please contact Rob Rader at (949) 674-5110 or [email protected] for more information.7.5

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