The Irvine Company plans to start building twin 14-story office towers next month in the Irvine Spectrum.
The move will make it one of the first developers with new speculative high-rise space in one of the tightest office markets in the U.S.
The developer has ordered steel and is set to begin construction before signing anchor tenants at 20 and 40 Pacifica, said William “Bill” Halford, president of the Irvine Co.’s office division.
Several other developers have announced plans for high-rise office buildings in Orange County. None have started construction without a tenant signed.
“It’s gravy that we are early in the game,” Halford said. “Whether we are absolutely the first is not as important.”
Both towers should be finished by late 2007, he said.
Halford said the Spectrum is maturing into something like Fashion Island’s Newport Center, with offices mixed with housing, shops and eateries. The Spectrum’s two existing towers are 100% leased,a sign workers like running errands on foot during their lunch breaks, he said.
One big tenant,Quest Software Inc.,is leaving one of the existing towers at 8001 Irvine Center Drive next month, leaving a 70,000-square-foot hole. Brokers said the Irvine Co. is close to filling the gap with more than one tenant.
OC’s office vacancy of 7.9% ranked the lowest in the nation among metropolitan and suburban markets, according to a study earlier this year by CB Richard Ellis Group Inc.
A more recent study by Voit Commercial Brokerage LP pegged the county’s vacancy at 7.3%, its lowest point since the 1980s. During the tech industry’s heyday, the rate bottomed at 7.9% in the second quarter of 2000.
“The overall office market in Orange County has gotten very tight, very quickly,” Halford said.
The Irvine Co.’s towers at 20 and 40 Pacifica are expected to total 628,000 square feet and double the amount of high-rises in the Spectrum. The two existing towers were finished in 1989 and 1990.
Halford said Newport Beach-based Irvine Co. is set to build both high-rises simultaneously. The Irvine Co. controls much of the land in the Spectrum.
“They have a unique position in Spectrum high-rises,” said Royce Sharf, executive vice president with Studley Inc. in Irvine. “They are the only game in town for true class A high-rise.”
A handful of developers have announced plans to go forward with high-rise construction, mostly in the popular commercial hub near John Wayne Airport.
Transwestern Commercial Services started demolition earlier this month to prepare for a 230,000-square-foot high-rise at Irvine Center Towers.
Los Angeles-based Maguire Properties Inc. plans a 600,000-square-foot tower near the San Diego (I-405) Freeway at the northern edge of Park Place, a sprawling 105-acre office and retail campus.
Maguire has leased nearly half the building to Irvine-based subprime lender New Century Financial Corp. and Los Angeles-based law firm Gibson, Dunn & Crutcher LLP. The developer plans to break ground later this year.
A partnership of Houston-based Hines Interests LP and Fort Worth, Texas-based Crescent Real Estate Equities Co. plans to start construction early next year on a 260,000-square-foot tower atop 1.2 acres at the corner of Michelson Drive and Von Karman Avenue in Irvine.
Work on the boldest tower is yet to get under way.
Developer Michael Harrah is planning a 37-story office tower in downtown Santa Ana. But Harrah must prelease half the building before he starts construction, according to an agreement with the city. His tower would be the county’s tallest if built.
Brokers generally are bullish on the proposed towers, though mortgage companies remain a variable.
Previously some of the biggest takers of office space, the industry now is under considerable strain from declining demand and rising interest rates.
Another factor is construction costs.
The cost of cement, steel and other materials have shot up during the past two years. Developers in China have gobbled up materials to fuel the country’s growth, according to the Irvine Co.’s Halford.
He said it’s still unclear if Hurricane Katrina is set to have a significant impact on the cost of materials.
The Irvine Co.’s high-rise plan in the Spectrum received unanimous Planning Commission approval earlier this month.
