While the commercial real estate market continued experiencing a boom in 2000, major developers brought less product to market than in red-hot 1999. And that was before predictions of a slowdown in the economy brought on a wait-and-see attitude among builders.
Industry leaders say the reason for the drop off in 2000 is the same ol’ same ol’: not enough buildable land readily available.
The 19 largest OC commercial companies brought 8.8 million square feet of commercial space to market in 2000, a 24% drop-off from the 11.5 million square feet they delivered in 1999. Although the size of the projects tapered off, the number of projects increased, according to Jerry Holdner, an analyst with Voit Commercial Brokerage. The firms on the list completed 79 projects in 2000, a 20% increase over the 66 projects started in 1999.
Large projects did come on line, but in diminishing supply. In 2000, smaller flex-tech developments overtook those projects, mostly through the efforts of The Irvine Company.
After holding down the No. 2 spot on 1999, the Irvine Company claimed the No. 1 position in 2000 with a flurry of activity. The Newport Beach-based company may not have built the largest buildings, but it completed 35 projects last year, nearly half of the entire list’s 79 projects, and up 40% from the 25 projects the company handled in 1999. By comparison, No. 4 Opus West Corp., with six developments, brought the second-highest number of projects on line. To put it into another perspective, The Irvine Company’s 35 projects totaled 1.50 million square feet. No. 2 Legacy Partners Commercial, Irvine, developed 1.35 million square feet with just five projects.
With Legacy dropping 22% in square footage developed from 1999 and The Irvine Company only dropping 5%, the two companies traded the two top spots from the previous year.
Besides Legacy, other companies had an eye on large developments. Nexus Development Co., Santa Ana, debuted on the list in the No. 9 spot by putting up 400,000 square feet of office product at its Twin Towers of MacArthur Place.
There were many “naysayers” about that project, according to Jeff Bitetti, director of marketing for Nexus. They questioned the area, the scope of the project and even the abilities of the Nexus team. Now Nexus is having the last laugh with their two nine-story buildings 98% leased.
“Timing is everything,” Bitetti said. “But it helps if you believe in what you do. Our motto is ‘the vision to develop and the commitment to deliver.’ ”
Somewhere Dale Carnegie is smiling, but even he would admit it all begins with location and it takes “tremendous ingress and egress to make your project successful,” as Bitetti said.
With all its efforts going into the one project, Nexus’ story serves as a good model for the majority of the developers on the list. Eleven of the 19 firms brought in one or two projects last year. With all their eggs in a very few baskets, the stakes are higher, the risks graver. And often it’s a game of waiting. For Nexus, the lag between acquiring the land and developing it was three years.
“Development is like an iceberg,” Bitetti said. “It’s the things under the water that you don’t see that make it work. We don’t have 10 projects going on at one time, so we were hands-on.”
Besides Nexus, the only other firms on the list to put up more in 2000 than in 1999 were No. 5 Parker Properties, No. 11 Olen Commercial Realty Corp. and No. 18 Warland Investment Co.
The Aliso Viejo-based Parker Properties surged 45% and jumped from No. 12 last year with the success of its Summit Office Campus. The family-run company developed 700,000 square feet in 2000 although its number of projects shrank from three in 1999 to one last year.
“We were fortunate with The Summit, getting it fully leased before going on with the development,” said Russ Parker, a principal of Parker Properties.
New entries to the list were Nexus, No. 16 Warland Investment Co. and No. 19 Voit Development Co.
Muller Co., Cousins Marnetcenters Inc. and Insignia/ESG Inc. are historically active in OC but did not deliver any new product in 2000. They are included on the list at No. 20, but their year-ago numbers are not included in the totals used for comparison.
While activity sloughed off, the leading developers added to their aggregate head count. Employment reached 1,069, a 6% increase from 1999. Again, The Irvine Company stood at the forefront of that increase. The firm grew its staff 18% to 440 employees.
Newport Beach-based No. 3 Koll Development Co. suffered the biggest dip in employment. The dropped 46% of its staff, down to 27. Historically, however, the firm remains the largest developer in OC with 74.0 million square feet of product delivered over the years. n
