It’s taken a while, but The Irvine Company is starting to see some leasing at the offices towers and low-rise buildings it is putting up.
The Newport Beach-based landlord has closed deals for about 100,000 square feet of space in its new offices in the past month, including full-floor deals for its latest additions to the Irvine Spectrum, Newport Center and near John Wayne Airport.
Orange County’s largest landlord has been aggressive in courting deals, although the company has made most of the leases without dropping rents far below its asking rates, according to local brokers who represent tenants.
“They are playing the hand that the market has dealt them,” said Randall Parker, managing director for the Newport Beach office of Travers Realty Corp. “For tenants that are large and financially strong, the Irvine Co. has made a business decision to pursue their business aggressively.”
Parker last month worked on a full-floor deal that will bring the Bank of New York Mellon Corp. to offices the landlord is building in Newport Center.
Elsewhere in the county, last month saw two sizable tenant signings at 20 Pacifica, the first of two towers the company built at the Irvine Spectrum.
Dolinka Group LLC, a finance and facilities planning consulting company, signed a 10-year, 20,000-square-foot lease at the 15-story building. It plans to move its Newport Beach headquarters to 20 Pacifica late this year. Also, Beverly Hills-based City National Bank signed a deal to open a branch on the ground floor of the new building. It will be moving from a nearby location.
“We’re starting to see some good activity, especially in the Spectrum,” said Steven Case, senior vice president of leasing for the
Irvine Co.
The latest deals, combined with an earlier lease with UBS Financial Services Inc. and about 10 smaller deals, makes 20 Pacifica about 30% full, Case said.
While below the company’s initial expectations, the building “is outperforming (the four new offices going up in) the airport area,” Case said.
One of those four buildings being built near the airport is the Irvine Co.’s tower at 18100 Von Karman Ave., which just signed its first big tenant.
Environ Holdings Inc., an environmental consulting company, is moving its local operations to the building this July. The Arlington, Va.-based company signed a 10-year lease for the sixth floor of the Irvine Towers building, taking 24,234 square feet.
The company’s moving from Maguire Properties Inc.’s 2010 Main St. building. Environ counts about 55 people in its local operations.
Terms of the 10-year lease weren’t disclosed. The Irvine Co. “made an aggressive deal,” according to Staubach Co.’s Leland Bruce, who along with Bryan Fournier represented Environ in the lease.
Monthly rates at 18100 Von Karman run from $3 to $3.40 per square foot, according to the company’s Web site.
The 10-story, 231,178-square-foot office now is about 20% full. There are lease proposals out for another 160,000 square feet of space at 18100 Von Karman, according to Case.
Similarly, proposals are out for another 140,000 square feet of space at 20 Pacifica, which early last year saw the top floors being marketed at monthly rates as high as $4.30 per square foot.
Those rates have come down, but not much. The Irvine Co. has been holding the line more on its rental rates for its new buildings, brokers said. In some cases, that’s resulted in monthly rents near $4.
“At the end of the day, they’re not dropping rates ridiculously,” said Greg May, senior vice president for the Newport Beach office of Grubb & Ellis Co.
For the newer buildings, “They are being aggressive, but it’s in the form of concessions,” said Jeff Manley, chief executive for Newport Beach-based Cresa Partners LLC. “They are still being patient with rates.”
In 2001, when local vacancy rates creeped up to about 20% following the dot-com bust, the Irvine Co. was among the first local landlords to cut its monthly asking rates, by as much as 50 cents per square foot in some cases. It was a strategy soon followed by
others.
Rather than cutting asking rents across the board this time around, the Irvine Co. is pushing tenant-improvement packages, which in some cases is helping win deals.
Also helping to attract deals is that “tenants like the fact of knowing that (the Irvine Co. is) not going to sell” any of its buildings, May said.
The landlord is hoping to get 20 Pacifica, which totals about 312,000 square feet, at least three-quarters full by the end of the year, Case said.
40 Pacifica, the second of the two buildings being built in the Spectrum, is due to finish in about a month.
Don’t expect to see too many lights on at the new building, at least in the near term. The Irvine Co. is holding 40 Pacifica for larger-sized tenants who would take up three floors of space or more, Case said.
The building sits closer to the San Diego (I-405) Freeway than 20 Pacifica and offers more prominent signs visible from the freeway for larger tenants, Case said. A few proposals are out for 40 Pacifica, but no imminent deals are expected to be announced, he said.
The lack of multifloor deals doesn’t appear to be fazing the landlord.
Until last year, the last tower to open in the Spectrum area came on line in 1990, when OC already counted an office vacancy rate topping 20%.
The opening back then of the 8001 Irvine Center Drive tower, combined with a slow rate of leasing at the time, had the Irvine Co.’s vacancy rates inching close to 30% in South County for a time in the early 1990s.
Despite a battering from the local mortgage industry implosion, office developers are building into a better market this time around. The Irvine Co. now says its OC office buildings are 12% vacant, slightly better than the 16% vacancy rate reported across the county.
Brokers estimate that the vacancy rate for the landlord’s high-rises runs closer to 20% or more.
