A little more than a month after signing Caltrans for a major expansion, Park Place Office Campus has inked rapidly growing Internet service provider Flashcom Inc. to take around 125,000 square feet.
Although representatives of the company declined to talk about the deal, sources confirmed that Flashcom will move its headquarters from 5312 Bolsa Ave. in Huntington Beach to the 1.8 million-square-foot Park Place campus.
With interest rates expected to keep climbing and more than 600,000 square feet of office space scheduled to open this year, some local real estate observers have expressed concern that boom times may be over in Orange County’s commercial properties market.
But the new long-term Flashcom deal, which has yet to be announced, has many brokers and landlords decidedly upbeat about the prospects for continued good fortunes in a new millennium.
“Flashcom is looking at an IPO in the near future and they wanted to be close to the (John Wayne) Airport,” said Tim Joyce of the Seeley Co., who tried to attract the company to a competing space in South Orange County. “This is a dot-com on the move, and Park Place definitely has space to accommodate its growth.”
Flashcom, which sells high-speed digital subscriber line service nationally, moved into its current 25,032-square-foot building last summer with 300 employees. It had been in Westminster before.
“They’re expanding so quickly that they needed space right away,” said Joyce.
Flashcom’s new Irvine space will have room for more than 400 employees, according to Joyce and others.
Winthrop Management, which runs Park Place and is a part owner of the campus, wouldn’t discuss the move.
But sources say the landlord has increased its lease rates since signing ConAgra Grocery in December to more than 400,000 square feet. That deal was completed for an estimated $91 million over 10 years, according to a leading researcher at a local brokerage house.
Winthrop had been asking around $1.85 a square foot for space at the campus before ConAgra agreed to its contract. Brokers familiar with the market say that Winthrop is now asking around $2.10 a square foot for a full-service-gross lease.
Market Coup
Regardless of where the final numbers fell in the Flashcom negotiations, Winthrop’s latest signing of a major tenant is considered a coup by market observers.
“They are moving very aggressively to fill a large amount of space in a short amount of time,” said Jay Carnahan of CMG Real Estate in Newport Beach. “That’s good news for everyone, not just the folks at Park Place.”
The monster office campus includes six four-story buildings attached by a common atrium. The complex also has a 10-story tower connected by a single-story concourse area with a restaurant.
It also is surrounded by several restaurants and a theater. And a new 308-room Ritz-Carlton hotel is going up adjacent to the office complex.
“We have a lot to offer at Park Place and activity has been very strong,” said Janine Padia, who is in charge of leasing for Winthrop in Irvine, following a deal at the end of January that saw Caltrans expand its space at the campus by more than 50,000 square feet to a total of 206,000 square feet.
Along with the signing of ConAgra at the end of 1999 and several smaller deals earlier this year, Padia figured last month that she had re-leased most of the 600,000 square feet vacated by her largest tenant, Fluor Corp., late last year.
But another large tenant, AirTouch Communications, is set to move out in November. The company is building a new campus in the Irvine Spectrum, leaving Winthrop with almost 200,000 square feet to lease.
According to sources, Flashcom’s deal effectively shaves more than 75,000 square feet from the looming AirTouch vacancy. It also will essentially fill the remaining 50,000 square feet left open by Fluor’s move.
More Deals Coming
And those familiar with negotiations believe that Winthrop is close to signing another 30,000 square feet of new leases. If those deals go through, Park Place’s vacancy, post-AirTouch, would fall to close to 100,000 square feet.
Considering what Winthrop was facing just a few months ago, that looks like small change to Jack McNutt of Grubb & Ellis in Newport Beach.
“The Flashcom deal at Park Place is just another indication that space remains in demand,” he said. “Compared to where they were a relatively short time ago, Park Place is sitting fairly pretty right now.”
The veteran real estate executive says he will monitor closely activity connected with several large chunks of space scheduled to open in the office market in 2000.
Among those are:
n The Irvine Co. is marketing about half of the 366,000-plus square feet of space now being leased by Western Digital in the Irvine Spectrum. The company’s lease will run out around the end of the year. Brokers report that Western Digital is only on the market for around 150,000 square feet and is only using about half the building it now occupies.
n Also at the end of 2000, around 257,000 square feet now occupied by AirTouch Communications is scheduled to open in the Irvine Co.’s Jamboree Center in Irvine.
n And Layton-Belling & Associates is talking to Taco Bell about subleasing part of its 12-story headquarters building. The Irvine tower has 265,000 square feet of space. Sources say that while speculation centers on how much space will be made available, some in the local real estate community wouldn’t be surprised to see Taco Bell move out entirely. Both sides dismissed those rumors in the Business Journal earlier this year, while confirming they are talking about making some of the space available to other tenants.
Koll Development and Nexus Development are also preparing to start construction of new office towers in the airport market, pointed out McNutt.
“Lease rates might not be quite as strong with so many large blocks of space coming online,” he said. “But given what we’ve seen at Park Place, companies are growing fast enough to keep demand high. Right now, you’ve got to think that additional office space is welcome news in a market like we’re seeing now.” n
