When 2211 Michelson opened its doors last summer, the 12-story building had the distinction of being the first office tower in Irvine to open in more than a decade.
Now the 265,000-square-foot building has another distinction. It’s the first of the six new offices towers going up near John Wayne Airport and the Irvine Spectrum to have leased more than half the building.
The building now is about 55% full, according to officials with Houston-based Hines Interests LP, which built the tower along with partner Crescent Real Estate Equities Co. of Fort Worth, Texas.
Among the other five new towers, Maguire Properties Inc. has the next highest occupancy rate, with its 3161 Michelson tower about a third full.
Maguire’s 531,000-square-foot building,by far the largest of the new Irvine towers,originally was about 50% preleased before starting construction.
But the landlord lost anchor tenant New Century Financial Corp. when the subprime mortgage lender went bankrupt last year.
Recent tenant additions to 2211 Michelson include FMR Corp.’s Fidelity Brokerage Services, which is leasing about 8,300 square feet of space on the building’s ground floor for a branch office.
Irvine-based law firm Rus, Miliband & Smith also signed on and will be moving its practice down the street to 8,500 square feet at the new building.
The building now counts about a dozen tenants, whose leases run an average of seven years. A few are looking to expand at the building, which could boost the occupancy rate at 2211 Michelson by another 10% or so, officials said.
Tenant brokers say that Hines, along with the other developers of new Irvine offices, have remained firm with their monthly asking rents of close to $3.50 per square foot, although concessions such as tenant improvement allowances have increased to as much as $70 per square foot.
Two years ago, at the height of the local office market, tenant improvement allowances were closer to $20 per square foot.
Hines officials are cautiously optimistic that they can fill up the rest of the building by the end of the year, or in early 2009. The remaining empty space includes the top floors, which would also come with prominent signs on the building.
The building opened during one of the slowest leasing markets Orange County’s seen in years. A year ago, the building was about 30% leased, following big deals struck with Charlotte, N.C.-based Wachovia Corp. and Irvine-based investment firm Pathway Capital Management LLC.
Deals since then have run smaller in size. When leasing began, it was expected that the breakdown between larger tenants taking close to a full floor of space and smaller tenants would be about 60% to 40%.
Instead, the ratio has been closer to 40% to 60%, said Douglas Holte, director of OC and San Diego operations for Hines.
“Fortunately the building is adaptable to smaller tenants,” Holte said.
Another factor for the building is its environmentally friendly design, which is beginning to get some attention from brokers and prospective tenants, he said.
The tough market for office leasing isn’t turning Hines off to OC. The company’s still moving ahead with plans for 1 million square feet of mostly mid-rise office space along Jamboree Road, between Michelson Drive and Dupont Drive.
The California Public Employees’ Retirement System is a partner in the proposed project, currently called “California Green.” The site is also expected to include 75,000 square feet of retail space, a hotel and 3 acres of open space.
Demolition work has begun for the site, which would be built over a five- to 10-year period. Marketing is scheduled to begin next year. But Hines’ won’t be starting construction of any offices until it lands tenants, the company said.
