Two midsize Irvine offices built at the onset of the recession finally are feeling the love.
Tetra Tech Inc. of Pasadena and Henkel North America, the U.S. arm of Germany’s Henkel AG, recently signed leases for space in Irvine for their local operations, according to brokerage data.
The leases are for a combined 135,000 square feet and are among the largest office deals seen in Orange County in recent months that aren’t renewals of existing space.
Even better for the struggling local office market, the two companies will be moving into a pair of new buildings that have been empty for the better part of two years.
Henkel, a maker of detergents, toiletries, cosmetics, industrial adhesives, sealants and other products, is said to be leasing all 77,626 square feet of space at 14000 Jamboree Road, according to brokers. It’s one of three new buildings at Irvine Company’s Jamboree Business Center, a 233,000-square-foot campus that opened in early 2008.
The low-rise office complex sits close to the Santa Ana (I-5) Freeway, the Foothill (261) Toll Road and Jamboree Road, near The Market Place shopping center. The first two office buildings at the complex saw tenants move in upon their completion. The building Henkel’s moving to had remained a shell without any occupants.
Tetra Tech, an engineering and consulting company, signed a smaller lease in Irvine.
It’ll be taking up about 57,300 square feet of space at 17885 Von Karman Ave., a 151,370-square-foot building at the corner of Von Karman and Main Street, a few blocks from John Wayne Airport.
Los Angeles-based Maguire Properties Inc. finished the building in 2007 to add to its adjacent Washington Mutual midrise campus, which now goes by Quintana.
Like the existing Quintana buildings, which saw declining occupancy as Washington Mutual Inc. (and later JPMorgan Chase & Co.) cut back local operations, the five-story 17885 Von Karman building struggled to get tenant interest upon its completion.
Tetra Tech will be the first occupant of the building, brokers said.
Maguire still runs the Von Karman building, which it owns in a venture with Australia’s Macquarie Group Ltd. Management for the rest of the 16-acre Quintana campus now is overseen by a special servicer after the landlord went into default on its loans.
JPMorgan Chase announced earlier this month it would be moving local operations from Quintana to another complex in Irvine.
Like JPMorgan, Tetra Tech and Henkel looked for space to stay in Irvine.
Tetra Tech currently counts two Irvine locations, including a nearby office on Cartwright Avenue, which it is expected to vacate in the move. Its other OC locations are in Santa Ana and Foothill Ranch.
Henkel
Henkel counts three Irvine locations, according to its Web site. The company consolidated its U.S. hair products business in Irvine about five years ago, following the $225 million acquisition of Costa Mesa’s Advanced Research Laboratories Inc.
Its Schwarzkopf & Henkel hair products business, on McGaw Avenue, is said to employ about 120 people in 35,000 square feet of space
Henkel is scheduled to move into the new space this summer. The new building could contain some higher-end lab space for the company’s operations, which appealed to the tenant, according to sources.
Neither company responded to requests to comment on the leases.
The two buildings Henkel and Tetra Tech will be moving into are believed to be the last two larger offices built in OC during the boom construction years of 2006 and 2007 that had yet to land tenants.
Close to 7 million square feet of office space was built in OC from 2006 to 2008, with more than 4 million square feet finishing up in 2007—just as OC’s economy began to implode.
The county now counts about 107 million square feet of office space. The recent flurry of construction combined with local job losses in the past few years have boosted the area’s vacancy rate from less than 10% in early 2007 to about 18% now.
After several years of slow leasing, there have been positive signs emerging in the market, local brokers said.
“There seems to be a lot more activity (now),” said Greg May, senior vice president for the Newport Beach office of Grubb & Ellis Co. “Tenants know where they’re going to be in the future. A year or two ago they weren’t sure if they’d still be in business.”
In December, Irvine Co.’s office properties division signed leases totaling 1 million square feet—its second-highest monthly leasing total ever, officials for OC’s largest landlord said earlier this month.
For all of 2009, Newport Beach-based Irvine Co. said it signed office leases for more than 6.7 million square feet of space.
Deals getting done now aren’t necessarily at prices landlords expected a few years ago.
Available space at the other two Jamboree Center buildings, next to Henkel’s new office, runs about $1.55 per square foot a month, according to Irvine Co.’s Web site.
In late-2007 when the developer was putting the finishing touches on the estimated $22 million project, it advertised rates closer to $2.35 per square foot at full-service gross lease rates.
The three-building Jamboree Business Center complex now is about 75% full, following the Henkel lease, according to brokerage data.
Space at the Von Karman office is listed at monthly rents of $2.65 per square foot, according to CoStar Group Inc.
Even with the two leases, there’s still plenty of space available for tenants needing multiple floors of space for their operations.
At the end of 2009, there were 28 contiguous blocks of space totaling 100,000 square feet or more in OC, according to the Irvine office of tenant brokerage Studley Inc. That’s up from 27 blocks of space a year earlier.
