Orange County ranks seventh nationally for converting office buildings into other real estate uses, primarily multifamily housing, according to a new report from CBRE.
Local property owners have a combined 4.2 million square feet slated for conversion to either industrial or multifamily use, according to the report tracking 58 office markets nationwide. Local conversion projects equal 4% of all Orange County office space, and only two other regions in the nation (Cleveland, Ohio and Cincinnati ) had a higher concentration of conversions.
In total, 23.3 million square feet of space in these markets are slated for demolition or conversion, CBRE says.
Markets in the Top 10 for office space conversions included, from one to 10: 1 Manhattan, Washington, D.C., Houston, Chicago, Dallas/Fort Worth, and New Jersey, Orange County, Atlanta, Phoenix and Cleveland.
Here in Orange County, 26 overall projects include 19 aimed at a multifamily flip. They are either underway, planned for conversion or ready for demolition this year, CBRE says.
Strikingly, only 168,000 square feet of office space is under construction, all of it at OC Vibe in Anaheim.
As a result, CBRE says, Orange County will see its net office inventory fall this year, “just like nationally but to a greater extent.”
“We are seeing the ongoing trend over the past few years of specific office properties situated on a significant amount of land being reimagined for new uses,” said Anthony DeLorenzo, vice chairman at CBRE. “The combination of the irreplaceable location of the property and the mixed-use overlay zoning contributed to strong demand from the residential development community, like the building at 2020 East First Street in Santa Ana.”
Meritage Homes is planning to demolish the office complex at 2020 E. First St. for residential use, building 86 townhomes in its place. Meritage bought the property near the convergence of the 55 and 5 freeways from Harbor Associates for $19.2 million. The deal closed April 29.
Another project submitted in late March in Lake Forest would convert the former Loan Depot headquarters at 26632 Towne Centre Drive in Foothill Ranch to housing units. The plan would replace three buildings called Town Center Plaza with 181 attached multifamily units. Notably, that housing would be in walking distance to a proposed Costco at Foothill Ranch Towne Center.
CBRE researchers note the office conversion trend will likely slow as the cost to complete such projects goes up with tariffs and wages.
“The conversion trend faces a few headwinds,” says Mike Watts, CBRE Americas president of Investor Leasing. “The pool of ideal buildings for conversion will dwindle over time. And costs for construction labor, materials and financing remain high.”
Here’s a list of some of Orange County’s office conversions, provided by CBRE:
—16715-16969 Von Karman Ave, Irvine, to industrial.
—VKCC, Irvine, to multifamily.
—Towne Centre Plaza, Foothill Ranch, to multifamily.
—Town Center Corporate Park, Aliso Viejo, to multifamily.
—The Volt Campus, Orange, to industrial.
—Pacific Commercentre, Lake Forest, to industrial.
—Parkcenter, Santa Ana, to multifamily.
—Park 55, Santa Ana, to multifamily.
—95 Argonaut, Aliso Viejo, to multifamily.
—15 Argonaut, Aliso Viejo, to industrial.
—The Residences at 1300 Bristol St, Irvine, to multifamily.
—MacArthur Square, Irvine, to multifamily.
Perhaps the county’s first completed office conversions was the demolition of Elevate@Harbor at 3100 and 3130 S. Harbor Blvd. The two-building complex has since been replaced by a logistics warehouse.
Other highlights from the report:
—Seventy-six percent of active conversion projects in the U.S. are multifamily.
—Hotels account for only 8% of the conversion projects.
—Life sciences labs, which once were among the top options, fell to 3% of the pipeline
—Other uses make up 10% of projects and industrial and logistics just 4%.