COMMERCIAL
The tumult and mixed signals seen these days in the real estate and finance markets is dividing the country’s top commercial property analysts.
At a forum this month, sponsored by the Center for Real Estate at the University of California, Irvine’s Paul Merage School of Business, three of the country’s top researchers were asked what is the best sector to invest in these days.
The audience got three different answers.
Robert Bach, chief economist for Santa Ana-based Grubb & Ellis Co., said that from a national perspective, there’s the most opportunity in shopping centers. In particular, undervalued properties in heavily ethnic areas could be good deals, along with grocery-anchored centers in strong locations, he said.
In OC, the shopping center and more general retail market is holding up. The county counts one of the lowest vacancy rates in the country, about 3% to 4.5%, according to most area reports.
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Teridian’s Irvine HQ: reupped for 32,000 square feet |
There are a few signs of worry, though. Bach notes that OC landlords have begun taking a closer look at prospective tenants’ financials, and in some cases are coming down with their asking rents.
Retail lease rates run about $2.65 per square foot in the county. South County continues to have the most expensive rents, averaging about $3 per square foot.
Higher-quality apartments in good locations are the best bet for investors these days, according to Gregory Leisch, chief executive of Washington, D.C.-based Delta Associates Inc. For owners of other types of commercial properties, now’s probably the time to hunker down, work hard to keep tenants and make improvements, he said.
Craig Leupold, president for Newport Beach-based Green Street Advisors, an influential real estate investment trust analyst, picked a third option,malls.
What’s certain: Office buildings weren’t at the top of any of the analysts’ lists as far as investments.
The office market is the most overvalued of any commercial real estate sector, according to Leupold. Historical data shows the sector could be facing national price declines in the range of 20% in the next few years.
Along with malls, apartments and strip shopping centers are the most attractively priced in the country, Leupold said.
Chipmaker Extends Lease
Chipmaker Teridian Semiconductor Corp. has reupped its lease for its Irvine headquarters.
The company, which makes chips for electricity meters, smart card readers, satellite set top boxes, as well as other devices, extended its lease at 6440 Oak Canyon, next to Oak Creek golf club.
The five-year lease is for 32,000 square feet. The company has been at the two-story building, owned by The Irvine Company, for the past five years.
Rick Kaplan and Rob Lambert from the Irvine office of Cushman & Wakefield Inc. represented Teridian in the lease. A value for the lease wasn’t disclosed.
RESIDENTIAL
Two of the country’s top 50 apartment owners are based in OC, according to the latest rankings from the National Multi Housing Council.
The biggest local owner may not be who you’d expect. It’s Irvine’s WNC & Associates Inc., which counted 48,881 apartments to its portfolio as of January. That placed it at No. 20 on the council’s list.
WNC’s portfolio emphasizes affordable housing. The company sells tax credits to its big base of individual and institutional investors, which now tops 19,000. The company’s doubled the size of its portfolio during the past eight years, with holdings now valued at about $3.6 billion.
The Irvine Co.’s apartment division moved up six spots on the list to No. 26. It added more than 7,000 apartments to its portfolio last year, bringing its total to 39,765.
Most of that addition was from last October, when the Irvine Co. paid an estimated $1.4 billion to buy a 90% stake in a portion of Archstone-Smith Trust’s Southern California apartment portfolio, totaling about 6,000 apartments.
In a separate polling of the country’s biggest apartment managers, the Irvine Co. was No. 27, while Western National Property Management of Irvine was No. 47, with 27,279 apartments under management last year.
