Chicago-based Equity Office Properties Trust has cleared an initial hurdle to develop 1.16 million square feet of high-rise office space in The City/The Block area of Orange.
The four-building project on 34 acres received unanimous support from the Orange Planning Commission at a recent public hearing and is now before the City Council.
The land currently is surface parking lots. Equity would develop the project by consolidating the spaces into parking structures.
The City is the area bounded by Lewis Street, the Garden Grove (22) Freeway, the Santa Ana River Channel and the Santa Ana (I-5) Freeway.
Equity officials were unavailable for comment, but should the development receive approval from the City Council, don’t expect a groundbreaking any time soon.
According to Planning Commission documents, Equity plans to phase the development over the next 10 years.
At least one analyst believes the proposal is more of a positional move than anything else.
“I think that development would be chancy from a market standpoint. It’s soft right now. And looks like it’s getting softer,” said Walter Hahn, a real estate consultant with E & Y; Kenneth Leventhal Real Estate Group. “But you get your entitlements when you can. If you have to sit on them, you sit on them. There are office parcels in the airport area that were entitled in the ’80s that were never built on.”
Considering the health of the market, Hahn estimated it would be two to three years, at best, before Equity could break ground on the project. And the real estate giant would enter a competitive marketplace with a southward-moving bent.
“It hasn’t been since the ’80s that office space has been built at all (in “The City” area) and there’s between 1.5 and 2 million square feet of space that’s vacant in the South County with developers scrambling around, trying to fill it,” he added. “It wouldn’t make sense to begin the project right now, considering that office campuses in the South County have sucked a lot of people out of the mid- and high-rises.”
As it stands, the project calls for:
–The City Tower: a 24-story, 465,000-square-foot office building and an eight-level parking structure on the west side of The City Drive, just south of Chapman Avenue.
–The City Plaza: a 19-story, 360,000-square-foot office building and a six-level parking structure on the north side of Metropolitan Drive between Lewis Street and The City Drive.
–The 605 Building: a 10-story, 200,000-square-foot office building and a five-level parking structure at the northeast corner of Lewis Street and Metropolitan Drive.
–The Chapman Avenue Site: a 6-story, 132,000-square-foot office building and a five-level parking structure at the northeast corner of Chapman Avenue and Manchester Place.
The project would be Equity’s first development in OC, according to brokers, but the nation’s largest property manager already has a strong presence locally, strengthened by its acquisition of Spieker Properties Inc. in the spring. Equity paid about $7 billion for Menlo Park-based Spieker, and the combined companies hold an OC portfolio totaling 37 buildings and more than 6 million square feet of space, making it the seventh-largest property manager in the county.
That stance is a huge turnaround for Equity’s owner Sam Zell, who, a decade ago, poo-pooed the Left Coast market.
But Hahn said Zell was too aware of OC and Southern California’s long-term, high-growth potential to stay away forever.
“In the early and mid-’90s, Sam came in here when all the office prices were in the crapper and he bought a lot of office buildings on the cheap,” Hahn said. n
