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Count one more believer in Orange County’s office market recovery: Marcus & Millichap Real Estate Investment Brokerage Co.
OC moved up a notch in its annual national office market ranking to No. 3, based on a dearth of new development coupled with an improving economy.
Marcus & Millichap ranked 42 markets based on their prospects for this year. It focused on the value of office buildings to investors.
The brokerage said OC is building on momentum that began last year.
John Przybyla, a regional manager in Marcus & Millichap’s Newport Beach office, said in a statement, “As office prices continue to rise in 2005, buildings with vacancy issues, such as in the cities of Anaheim and Santa Ana, will be prime investment targets.”
Fort Lauderdale topped the ranking. There’s not much development there while business is on the upswing.
Washington, D.C., slid one spot to No. 2, on a slightly less optimistic job growth forecast.
OC wasn’t the only Southland market in the top five; Riverside and San Bernardino counties, listed as one entry, notched the No. 4 spot.
Once thought of as strictly an industrial hub, population growth is spurring hiring in professional and business services, according to the brokerage.
New York City rounds out the top five, with above-average office job growth and low vacancy.
Marcus & Millichap’s rankings are based on expected growth in office employment and rent, as well as vacancy, construction and absorption.
The markets at the bottom of the list,Columbus, Ohio, Raleigh-Durham, N.C., and New Haven, Conn.,face poor economic outlooks.
A few OC highlights from the report:
Employment growth should hit 35,000 this year, up from a gain of 31,000 jobs last year.
Defense industry orders are on the rise and Disneyland is celebrating its 50th anniversary, both of which will spur hiring.
Development will increase slightly this year but will remain minimal by historical standards.
Office buildings finishing construction should total 525,000 square feet this year, up from 375,000 square feet last year, but far short of the 4.7 million square feet added in 2001.
Tenant demand will remain strong in 2005 with vacancy expected to decline to 11.1% from 12.8%.
Office-related jobs should rise by 13,000 positions this year.
Growing tenant demand will give owners more leverage this year, and many will begin to pull back on concessions.
Rents should rise about 2%.
The report also noted that while office sales were strong near John Wayne Airport, individuals tended to buy in Central Orange County.
The median price in the airport area rose by 25% versus the past year to $195 per square foot, due to a number of high-profile deals.
Competition also was high among private investors in Central County, where the median price per square foot increased from $119 in 2003 to slightly more than $132 last year.
I recently got a chance to speak to a key player in the county’s hot high-rise housing trend: the buyer.
Some buyers attended the groundbreaking ceremony earlier this month for The Plaza-Irvine, twin 15-story condominium towers on Jamboree Road under development by Phoenix-based Opus West Corp. and Scottsdale-based Geoffrey H. Edmunds & Associates.
The three buyers I met were middle-aged. Two were working men,one single, one married. I also met a widow, Carole Records, who said she had sold a house on Balboa Peninsula and was retired.
They certainly fit the mold promoted by high-rise developers who say their towers will appeal to older residents who want to swap a traditional home for an easier-to-take-care-of condo with doormen and other services.
“I think I’m ready for this,” Records said. Later, she said, “This is a real impulsive thing I did.”
Antoine Farsai, who bought a condo on the sixth floor of the first tower, said he has lived in New York and likes the high-rise lifestyle. He’s an engineering consultant.
“The place is safe. Everything is taken care of,” he said. “I’m just hoping not to be bothered by noise from the street or airplanes.”
Of course, I don’t know if the three buyers I talked to constitute a representative sample of all buyers. Rumors abound that many high-rise buyers are investors.
Opus and Geoffrey said they have sold some 90 condos of the 101 planned in the first tower at the corner of Jamboree Road and Campus Drive. Average price: $1.2 million.
They recently started selling condos in the second tower, which is set to be identical to the first.
Prices range from nearly $600,000 to $3.5 million. A third, similar tower, is set to come later.
Nearby, Bosa Development Corp. is far along on construction of twin 18-story high-rises.
The Canadian-based developer nearly sold out months ago.
I asked a couple of Plaza-Irvine buyers if they had looked at the Bosa project. They said it was too close to the freeway.
