By SIMON DILLON
There are 118 high-rise office buildings in Orange County with more on the way.
As rents rise toward about $3.25 per rentable square foot per month on most sites, new development will continue.
Most planned projects require large lease signings before construction begins. The number of available sites for development has declined due to aggressive homebuilders who have been paying higher premiums for parcels because they can generate higher returns.
Existing high-rise buildings still are a relatively good value. Although effective rental rates have increased about 20% since the end of 2003, they are, in most cases, less expensive than replacement building cost rents.
In addition, in a soft market, rent differences between high- and low-rise buildings compress. Then, as the market strengthens, the delta expands.
The difference between rents for high- and low-rise space is expanding, but still relatively compressed. Expect to see the spread widen between high- and low-rise office space in the coming quarters. In addition, expect premiums on higher floor office suites or ones with views to be more prevalent.
Despite the trends, there still are pockets of opportunities in various high-rise buildings.
High-rise building owners who aren’t seeing high (more than 90%) occupancy levels generally are more motivated to lure tenants and less interested in pushing for the extra nickel.
High-rise developments in the works include twin 14-story towers planned for the Irvine Spectrum by The Irvine Company.
Olen Properties Corp. of Newport Beach is putting up a 130,000-square-foot, five-story building in Brea for subprime lender Residential Mortgage Assistance Enterprise LLC, which plans to relocate from elsewhere in Brea.
In Irvine, Scholle Corp. signed a 200,000-square-foot lease with Newport Beach-based Impac Mortgage Holdings Inc. and plans to put up a seven-story building for the mortgage company.
And Maguire Properties is in talks with Irvine-based subprime lender New Century Financial Corp. to lease several floors of a proposed 20-story building in Irvine.
Dillon is a vice president in the Newport Beach office of CB Richard Ellis Group Inc. The Business Journal’s Mathew Padilla contributed to this article.
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