Orange County’s Boom in Office Space Conversions

Categories: Business NewsConstructionNewsReal Estate & Properties

Recent office space conversions in Orange County pave the way for multifamily housing.

News Summary

Orange County has ranked seventh in the U.S. for converting office buildings into multifamily housing and industrial uses, with 4.2 million square feet targeted for redevelopment. The trend reflects a response to rising housing demands amidst high office space availability. A total of 26 projects are underway, focused primarily on multifamily housing. However, experts express concerns about rising construction costs that could impact this trend. Key projects include significant transformations in Santa Ana and Lake Forest, underscoring the county’s evolving real estate landscape in line with national trends.

Orange County ranks seventh in the United States for converting office buildings into multifamily housing and other real estate uses, according to a recent report from CBRE. The report highlights that a total of 4.2 million square feet of local office space in Orange County is set to undergo conversion to industrial or multifamily use, which constitutes approximately 4% of the entire office space in the region.

This trend of repurposing office properties is a response to both the high demand for housing and the excess supply of office spaces in the area. In total, there are 26 conversion projects underway, planned, or already demolished this year in Orange County, with 19 of those projects specifically aimed at creating multifamily housing. Notably, only 168,000 square feet of office space is currently under construction in the area, all contributing to the OC Vibe development situated in Anaheim.

At a national level, around 23.3 million square feet of office space across 58 office markets is either scheduled for demolition or conversion. The top 10 markets for such transformations include major cities like Manhattan, Washington, D.C., Houston, and Chicago, with Orange County finding its spot just after New Jersey and ahead of cities like Atlanta and Cleveland.

Some of the prominent conversion projects in Orange County include the former office complex at 2020 East First Street in Santa Ana, recently acquired by Meritage Homes for $19.2 million, where plans are in motion to demolish the building and construct 86 townhomes. Another significant project is underway in Lake Forest, where the former Loan Depot headquarters will be transformed into 181 housing units and is conveniently located near a proposed Costco.

Despite the current enthusiasm for office space conversions, experts warn that the ongoing trend may face challenges due to rising costs associated with construction labor, materials, and financing. Nationwide, 76% of active conversion projects are focused on multifamily housing, while hotels account for just 8%. Life sciences labs represent a minimal 3% of the conversion pipeline.

The specific examples of office conversions in Orange County further exemplify this shift in real estate dynamics. Projects include transforming buildings at locations such as 16715-16969 Von Karman Ave in Irvine to industrial use, converting VKCC in Irvine and other properties into multifamily housing, as well as repurposing sites like The Volt Campus in Orange into industrial spaces.

In alignment with national trends, Orange County is expected to see a net decrease in office inventory this year. The report indicates that even as many conversions are being planned or implemented, they remain subject to the economic realities of construction expenses and the availability of financing.

The correlation between office space surpluses and housing shortages is driving this significant shift in local real estate trends. The recent demolishment of Elevate@Harbor has already led to the establishment of a logistics warehouse, further demonstrating how developers are responding to the changing market demands effectively.

As Orange County continues to adapt to these evolving real estate needs, it solidifies its position as a significant player in the national landscape of office space conversions, in pursuit of achieving greater efficiency and meeting the housing demands of its growing population.