Posts by Jeffrey Shepard

COVID-19’s Effect on Orange County’s Commercial Real Estate Market; The Damage Being Done, and What’s to Come in the Future

Jeffrey Shepard on August 26, 2020

No matter how you look at it, the news is bad: U.S. economic output fell at a 32.9% annual rate in the second quarter, a level not seen since the Great Depression and by far the largest drop since government record keeping began in 1947, according to data released at the end of July. The sharp contraction, reflected in the government’s report of gross domestic product–the sum of all goods and services produced in the country–include data from mini-recovery that occurred before the latest surge in the COVID-19 pandemic.

The brutal shock to the world economy by COVID-19 will also drive the commercial real estate office market to very uncomfortable new depths not seen in 20 years…maybe longer. At the macro level, Orange County’s second quarter of 2020 ended with over 36,000,000 SF of office, industrial and flex space on the market. Of particular concern is the increasing amount of sublease space in Orange County, with the second quarter of 2020 ending with approximately 5,800,000 SF of total sublease space for office, industrial and flex space, and we believe this is just the tip of the iceberg. The office market alone in Orange County has seen the addition of over 300,000 SF of sublease space since March, with 46% being listed in June alone.