The Irvine Company plans to develop 270,000 square feet of Irvine offices in a move many will read as the start of a new phase in the commercial real estate sector’s comeback.
The developer is set to build five low-rise office buildings on speculation it can find tenants for the space. The buildings are marked for the Irvine Technology Center near The Marketplace shopping center straddling Irvine and Tustin.
The plan already has made waves in the commercial real estate sector, where people have waited for years for a major development company to commit to putting up big buildings for lease.
“It has been about three years since we have done anything over 100,000 square feet,” Irvine Co. spokesman Bill Rams said.
The Newport Beach-based developer should break ground on the buildings by summer, Rams said.
During the commercial real estate downturn that started in 2001, the Irvine Co. stayed busy developing neighborhoods and refurbishing shopping centers and office buildings.
In 2003, the Irvine Co. did put up a 50,000-square-foot office building near its headquarters in Newport Beach. But that was seen as a special case in a specific area,Newport Center,and not a reflection of the broader market.
The Irvine Technology center is 97% full, according to Rams. Tenants include Bax Global Inc., an Irvine-based unit of Virgina’s Brinks Co., as well as Irvine-based New Century Financial Corp. and Woodland Hills-based insurer 21st Century Insurance Group.
The center has an “ideal location” near the Santa Ana (I-5) Freeway and the Eastern and Foothill toll roads, Rams said, drawing workers from Orange County and the Inland Empire.
The company’s plans in Irvine have brokers buzzing.
“They are definitely seeing the market firm up,” said Kurt Strasmann, managing director with Grubb & Ellis Co., referring to Irvine Co. executives. “I think office development is going to come around next year.”
Indeed, office development in the county appears poised for a comeback next year, at least among developers of low-rise buildings.
The catalyst: lower vacancies.
The county’s vacancy rate dipped to 11.5% in the third quarter, down from 14.5% last year, according to CB Richard Ellis Group Inc. The closer it gets to 10%, the stronger the market, brokers said.
Two developers are planning separate projects in Aliso Viejo next year.
Parker Properties LLC plans to start construction in February on a 140,000-square-foot, four-story office building at its Summit Office Campus. The developer, which counts the Summit as its headquarters, plans a second 120,000-square-foot building in 2006.
Not far away, Shea Properties, the commercial arm of Walnut-based J.F. Shea Co., plans a 75,000-square-foot, three-story office building at its Vantis complex. Shea Properties also is based in Aliso Viejo.
But don’t expect to see office high-rises popping up anytime soon, brokers said.
“What’s going to affect development is the cost of construction today,” said Greg Brown, senior director with Cushman & Wakefield Inc.
Higher prices for steel and concrete stand to deter construction of office towers, at least until rents rise further.
And that could be in the works. According to some brokers, a lack of large blocks of space for lease could lead to rental rates rising quickly next year.
