OC Enjoying Strong Fundamentals With No Slowdown Expected

The fundamentals are strong in Orange County, though the area has challenges, from the perception of being less urban than LA to its tight labor market.

Bisnow caught up with CBRE Senior Managing Director Kurt Strasmann to learn about what he sees ahead for the county.

Bisnow: What is the state of the market in Orange County?

Strasmann: Overall, Orange County is exceptionally well-positioned on multiple fronts. In most sectors — office, multifamily and industrial — all fundamentals look very strong. Demand has kept up with supply in all these sectors, we have experienced excellent rental appreciation and investors continue to view Orange County as a safe and well-positioned market. We have all the elements of what anyone would want in the market of the future — a very diversified economy, a very strong emerging technology sector, high-quality labor force, consistent job growth, housing alternatives and barriers to entry. On the retail front, some sectors are experiencing difficulties related to the emergence of e-commerce and the effect on big-box retail, but those assets will be repositioned. Some retail sectors that are performing well include fitness, entertainment and groceries. They have benefited from the OC’s strong economy and demand from the tourism sector.

Bisnow: Do you think there will be a recession anytime soon? Why or why not?

Strasmann: Our latest forecast suggests a slowdown is about two years out, around 2019. But there are no specific reasons for a downturn, except that eventually every recovery will slow. Hence I have seen this forecast get pushed out every year. The bottom line right now is that our recovery has been steady, and we expect more of the same.

Bisnow: Does Orange County have its own unique challenges compared to Los Angeles?

Strasmann: For investors who prefer the urban space, Orange County may not be their first thought. That is a perception that this area has to overcome. Overall most investors view the [Greater Los Angeles/Orange County region] as one market with many subregions. Each region has its own dynamics and nuances. Most [of] our surveys from investors view the general region as being very strong. One area that is difficult for businesses in Orange County is the tight talent market. The OC continues to have one of the lowest unemployment rates in the region. That’s a great thing but can also be a challenge.

Join Strasmann and other OC experts at the Bisnow Orange County Capital Markets event Nov. 2 at the Irvine Marriott.