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Most economists don’t foresee much building in Orange County next year, but at least one developer sees opportunity in build-to-suit projects.
In OC, “the worst days of construction activity are still ahead of us,” said an economic forecast released this month by the A. Gary Anderson Center for Economic Research at Chapman University.
Chapman economists estimate there was a 29.4% decline to about $2.7 billion in permit valuations for housing and commercial construction here in 2008 compared to 2007. That drop will negatively impact construction spending and employment in the homebuilding and construction sectors next year.
In 2009, Chapman expects the value of OC’s permit valuations for all construction to drop another 3.3% from 2008 levels, to $2.6 billion.
If there’s going to be commercial development plans during the next couple of years, expect it be of the build-to-suit nature, and not speculative construction, said Brandon Birtcher, president of Irvine-based Birtcher Development & Investments.
Businesses that need distribution or manufacturing space, or perhaps an office in the suburbs, are the most likely sources of build-to-suit opportunities for the next year or two, Birtcher said.
If a company is doing well in this economy, now could be the time to build, he added.
Land prices have gone down dramatically, construction-related commodity prices have become much more affordable, and the availability of good labor is as high as it has been in years, Birtcher said.
Along with OC, Birtcher is looking for build-to-suit opportunities in a couple other markets, including Portland, Los Angeles and Vancouver, Wash.
He’s also expecting to do more investing in existing buildings, and he is looking to line up an “opportunistic” fund with money from institutional players and investors.
The plan is to buy properties for about a five-year period, targeting well-located assets with current owners who need to sell, Birtcher said. Pricing for those types of deals could be 25% or more off their peak values, seen just a year or two ago, he said.
UCI Medical Lease
OC’s second-largest hospital, UCI Medical Center, is behind one of the biggest North County industrial leases seen this year.
UCI Medical signed a 74,620-square-foot lease in Fullerton, for off-site storage of medical supplies that will be used at the Orange-based hospital.
The 10-year lease will begin in May. Its total is $6.85 million, which puts monthly rents there at about 76 cents per square foot.
Other than renewals, this is the largest new industrial lease in the Fullerton submarket for 2008, according to Ian Britton, a first vice president with the Anaheim office of CB Richard Ellis Group Inc.
The address wasn’t disclosed by either UCI Medical or the property’s landlord, Fullerton-based KDK Property Management LLC. Based on public records, the space looks likely to be 1331 S. State College Blvd., a building KDK acquired in 2002 for $5.7 million.
The State College building had been the headquarters of Fullerton-based Motive Eyewear Inc., a maker and seller of glasses, sunglasses and frames.
Motive, formerly known as Sunglass Products Inc., was acquired in April by a onetime rival, Florida-based StyleMark Inc.
At the time of the merger, Motive counted about 400 local employees, who mostly worked in Fullerton and at a 200,000-square-foot distribution center in Anaheim.
CB Richard Ellis represented both sides of the UCI Medical lease, with Britton and Brad Bierbaum representing KDK, and Jim Wootan and Tom McAllister representing the tenant.
Alliance Renews
Alliance Medical Products Inc., an Irvine-based contract medical production company, has renewed the lease for its headquarters in the Irvine Spectrum.
The company, which was spun off from Bausch & Lomb Inc. in 2002, signed a 10-year lease for 52,100 square feet at 9342 Jeronimo Road, which is owned by Irvine Company. Terms of the deal were not disclosed.
Alliance provides manufacturing and analytical services to the pharmaceutical and biotechnology industries.
Jeff Cannon and Tim Schramm, from the Irvine office of Studley Inc., represented Alliance in the lease.
Muller Sales
The Muller Co., a Laguna Hills-based developer and investor, sold off its portfolio of properties in Tucson for $46.3 million.
Muller Co. and partner GE Real Estate sold a six-building, 606,027-square-foot industrial/research and development portfolio to Intercontinental Real Estate Corp., a Boston-based real estate investment company.
Ryan Gallagher and Kelly Rohfeld, from the Newport Beach office of Grubb & Ellis Co., represented both parties in the deal, along with local market brokers from Picor Commercial.
