Developers See Cooling Market for New
For the past couple of years, major developers have been adding space eagerly to Orange County’s 55 largest business parks, correctly figuring the strong leasing market would absorb the new square footage. But some of those same developers today see the market cooling somewhat, and they’re scaling back new construction.
In a measure of just how strong the market has been in the past few years, Orange County’s 55 largest office and business parks boast a healthy 85.1% occupancy rate, despite adding significant new space, according to the Business Journal’s inaugural list. The 55 parks,which consist of office, industrial and research and development space,totaled 49.4 million square feet.
Not surprisingly, given its regional and national stature, the Irvine Spectrum in South County is the biggest business center in OC, totaling 3.36 million square feet. Of that, 3 million, or 89.7%, is occupied.
Following the Irvine Spectrum, the Newport Center complex of buildings is the second-biggest business park in OC, with 2.8 million leasable square feet. The ring of buildings surrounding the Irvine Company’s Fashion Island retail center boasts an occupancy rate of 88.8%.
The rest of the 10 largest parks in Orange County are the Warland/Cypress Business Center in Cypress, the office buildings around C.J. Segerstrom’s South Coast Plaza retail center, The City office complex in Orange, Park Place in Irvine, the Irvine Co.’s University Research Park in Irvine, the Foothill Business Center in Foothill Ranch, the Koll Center Irvine planned office campus in Irvine, and Hutton Centre in Santa Ana.
Many of these complexes,along with many others down the list,saw their total leasable space grow in the past few years as developers took advantage of the strong demand by dot-coms and other firms for new space. However, that construction pace is expected to be much more measured for the foreseeable future.
One of those developers who have taken a more cautious approach is Olen Properties, which owns one of the biggest portfolios in Orange County, including Olen Point Brea, ranked No. 40 on the list with 547,243 square feet of space. Igor Olenicoff, who heads up the Newport Beach-based company, said there are ample reasons for caution.
“Although we’re looking for land, we’re doing it much more cautiously,” Olenicoff said. “We bought some and will be doing approximately 100,000 square feet of new development in A.J. West Ranch, but I don’t see it continuing (at the pace of the lat few years). But I also don’t see it coming to a crash like in 1991, either. Actually I’m quite pleased with what I’m seeing, because banks have stopped lending except on pre-leased product. I see that as a positive.”
Similarly, Jeffrey Bitetti of Santa Ana-based Nexus Development Corp. said officials at his firm are “proceeding prudently, with cautious optimism.” Nexus is in the midst of constructing one of the biggest new business centers in the county, the 400,000-square-foot Twin Towers complex in Santa Ana.
The two high-rise office buildings are 85% leased and “rapidly closing in on 90%,” Bitetti said. Among the tenants are Deloitte & Touche and AIG Insurance.
“This been three years in the making,” Bitetti said. “We’ve been blessed in that we hit the window of opportunity just right, but I certainly wouldn’t want to be a developer with a project on the drawing board right now. It’s really difficult to get them financed.” n
