COMMERCIAL
Landlords are turning their attention to filling Orange County’s office space with smaller tenants, but there’s still hope of landing a big fish.
Speakers at a recent real estate forum held at the Pacific Club in Newport Beach said OC’s relatively cheap office rents,compared with other West Coast markets,are likely to draw a big Fortune-500 type business from out of town in the near future.
Douglas Holte, director of OC and San Diego operations for Houston-based Hines Interests LP, said he’d be surprised if OC didn’t convince a major technology company from San Francisco or Seattle,where rates in downtown and suburb Bellevue top OC,to move the bulk of its operations to the area in the next five years or so.
While housing here isn’t cheap by any means, the cost of office space and running a business is still well below that of those other California cities, which could be a big draw for a company looking to expand to a campus-like development.
And OC’s housing market has the benefit of still having a few areas, such as El Toro’s Heritage Fields, which could accommodate a big influx of employees seeking housing.
The recent correction in housing prices also might turn out to be a plus, making a relocation a more affordable proposition, speakers said.
In the meantime, owners of the area’s newest towers are turning their attention to smaller tenants.
Holte said he’s spending more time courting tenants personally for his company’s 2211 Michelson tower in Irvine than originally expected. Small and midsize tenants are acting faster in signing leases than their larger counterparts, he said.
A 5% to 10% erosion in the county’s effective rents wouldn’t be a surprising result of the ongoing soft market, said landlord and developer speakers at the forum, which was jointly sponsored by the Center for Real Estate at the University of California Irvine’s Paul Merage School of Business and the Southern California chapter of the National Association of Industrial and Office Properties.
“Things are going to get worse before they get better,” said Terry Thompson, vice president of acquisitions for Newport Beach-based WCB Properties. “We look forward to the day when fundamentals matter again.”
Thompson says his company,owner of buildings such as Santa Ana’s Xerox Center and Union Bank Square in Orange,is working hard to differentiate itself from the competition these days. One way is by enticing brokers to get deals done.
When a lease gets signed at WCB’s buildings, brokers get paid their commissions within 48 hours, Thompson said.
NAIOP’s Busy Year
In addition to his position at WCB Properties, Thompson is wearing another hat these days. He’s the new president of the Southern California chapter of NAIOP, which counts some 1,200 members.
On the face of it, it’s not the best time to be in the development business, let alone be in charge of its main association.
The local real estate market’s slowing, the credit crunch continues, local and state governments are facing big budget problems and there’s debate over the direction of big transportation and green initiatives.
That said, “I think it’s a great time to be president,” Thompson said.
NAIOP also has a busy year planned in Sacramento, said James Camp, legislative chair for the association this year.
One big worry for the group is that the budget shortfall will result in a drought of money for transportation and infrastructure work, said Camp, who’s also senior vice president for the Newport Beach office of Voit Development Co.
Another problem with the slowing real estate market is that with fewer projects in the pipeline, those projects still moving forward tend to get a lot more oversight from local officials, which can slow the pace of development even further, he said.
RESIDENTIAL
Newport Beach developer CT Realty Corp. says it’s back in the apartment-buying game.
The company recently announced a venture with Macbeth Apartment Systems Inc. of Carlsbad to buy apartment buildings across Southern California.
Robert Campbell, CT Realty president, says the venture will be looking to buy buildings and complexes that it can improve and boost the value of, including apartments that were converted to condominiums but did not completely sell, and buildings held by banks that need to dispose of their assets.
CT Realty previously owned about 6,000 apartments, but sold them off in recent years as the company turned its attention to office, industrial and self-storage investments.
