First quarter office reports are coming out and what a rosy picture they paint of Orange County.
Vacancies are declining, rents are going up and leasing activity is on the rise.
To top it off, brokers said the hot sales market was just as strong in the first quarter as last year.
“We’re more optimistic at the beginning of 2005 than we were at beginning of 2004,” said Sherry Bower, who heads CB Richard Ellis Group Inc. in OC.
She said at the beginning of last year brokers were concerned by three things: the prospect of higher interest rates; politics, including terrorism; and signs of tepid leasing.
In the end, 2004 turned out to be a great year for sales. And leasing picked up late in the year, Bower said.
OC’s overall vacancy dipped to 9.6% in the first quarter, breaking the key psychological threshold of 10%, according to CB. The rate was 10.6% in the fourth quarter and 13.6% a year ago.
Voit Commercial Brokerage LP is even more positive, saying the county broke the 10% threshold last year. The county’s vacancy fell to 9.1% in the first quarter, from 9.6% in the fourth quarter of last year and 12.2% a year earlier, according to Voit.
Rents are on the rise. The county’s average rental rate rose to $2.14 per square foot per month in the first quarter, up 2% from the fourth quarter and 7% from a year ago, according to Voit.
The average class A rent asked by landlords in the first quarter was $2.26 per square foot for the county and $2.63 per square foot in the John Wayne Airport area, according to Voit.
Class A rents need to keep rising to justify new construction, brokers said.
Most brokers I talk to say a landlord needs to command $3 per square foot or more to make a profit on a new high-rise building. Land costs are high, and prices of steel, concrete and lumber have shot up during the past 18 months.
Moving Up
There’s been some executive promotions recently at Irvine-based real estate investment company Passco Real Estate Enterprises Inc.
The moves come after Sterling McGregor, formerly vice president of acquisitions and finance, left to become a principal at Core Realty Holdings LLC in Newport Beach.
Passco is one of the top tenant-in-common investors here. It pools money from different investors to buy real estate. Investors share ownership in a relationship known as tenant-in-common.
These investors typically have just sold a property and want to avoid paying capital gains under a section of the tax code known as 1031.
William Winn is now Passco’s president. He formerly was chief operating officer and senior vice president. Winn joined the company in 1998 and managed several big deals, including the 2003 acquisition of the Puente Hills Mall in Industry.
Chief Financial Officer Larry Sullivan assumes the additional role of chief operating officer. He is set to manage Passco’s financial and operational functions, in addition to participating in deals.
William Passo remains chief executive.
Finally, Paul Mittmann has been promoted to vice president of acquisitions from acquisitions manager. Since joining Passco in 2003, Mittmann has bought and financed more than 5 million square feet of shopping centers and industrial buildings, according to the company.
As for McGregor, he’s now executive vice president and a principal. He is set to find and manage acquisitions.
The main backer of Core is John Saunders, who owns Newport Beach-based London Coin Galleries Inc.
Saunders has been doing real estate deals on the side for years. Now it takes up more of his time then the coin business, he said.
Other Core principals are Vice Chairman Douglas Morehead, who also runs Newport Beach-based Optima Asset Management Services Inc., and Chief Executive Russ Colvin, who formerly headed an investment and development arm of Mission Viejo’s Mammoth Equities LLC.
Ventura Bound
Shea Properties, the Aliso Viejo-based commercial arm of Walnut-based J.F. Shea Co., recently hired David Newsome to oversee its new Ventura County office.
Newsome previously served as vice president of development with Westrust, a retail development and management company based in Calabasas. He has been involved in nearly 9 million square feet of development, according to a company statement.
From Shea’s new Westlake office, he’s set to oversee Ventura, Oxnard, San Fernando Valley and Simi Valley.
Shea Properties is working on River Park Town Center, a 700-acre, masterplanned community in West Ventura County.
The commercial arm is headed by W. William Gaboury, who has worked for the Sheas for two decades. He manages office and industrial buildings in California and Colorado, as well as apartments and shopping centers.
Gaboury set up a new Phoenix division, which is working on its first shopping center of about 130,000 square feet.
Newsome earned a bachelor’s degree in business administration from the University of Redlands. He is a licensed real estate broker and lives in Westlake Village.
