It’s not the gung-ho days of the 1980s, but a mini-boom in office high-rise office construction is brewing near John Wayne Airport.
The latest: Fort Worth, Texas-based Crescent Real Estate Equities Co. is set to buy land in Irvine with an eye to developing a 12-story office building, according to brokers.
Crescent is in talks with Japan’s Zenitaka Corp. to buy 1.2 acres at the corner of Michelson Drive and Von Karman Avenue, entitled for 271,727 square feet of office space, brokers said.
The sale price likely is $8 million to $10 million, or more than $30 per square foot, according to brokers.
A Crescent official declined to comment.
Brokers said Crescent is expected to start construction soon after closing the deal. It may not wait to sign an anchor tenant,a common move to offset risk,they said.
“It’s expensive land to not move forward with construction on the building,” said Bob Griffith, a broker with Grubb & Ellis Co., who is not involved in the deal.
The Crescent deal would bring the total number of sites near the airport primed for office high-rises to five.
At two of the locations, plans hinge on big lease deals from mortgage companies. Developers and brokers said a more broad-based rise in the office market is under way.
Maguire Properties Inc. plans the tallest of the proposed buildings, a 20-story, 600,000-square-foot tower at its sprawling Park Place office campus at the corner of Jamboree Road and Michelson.
The Los Angeles-based real estate investment trust is hashing out a lease deal with Irvine’s New Century Financial Corp., a subprime mortgage lender, to take a big chunk of the building.
Maguire also has entitlement for a four-story office building at the Washington Mutual Inc. campus in Irvine and for an 18-story high-rise in Costa Mesa at Pacific Arts Plaza.
Developers have not set construction dates for the planned high-rises. Two or three could break ground late this year, sources said.
Maguire is set to focus on Park Place first, according to Thomas Murphy, a broker with Jones Lang LaSalle Inc. in Irvine. He said Maguire has limited staff to handle three projects at once. The Costa Mesa high-rise likely will come later, he said.
In another mortgage-related deal, Newport Beach-based lender Impac Mortgage Holdings Inc. recently signed a 200,000-square-foot lease for all of a proposed seven-story building on Jamboree near Fairchild Road.
Packing company Scholle Corp., which has its headquarters at the site, plans a 450,000-square-foot office park there. Scholle originally planned a five-story building, but upped it by two stories to accommodate Impac, sources said.
The office market’s dependency on mortgage companies could be coming to an end, according to some brokers and developers. They said the county’s declining office vacancy, now near 10%, and rising office rents amid an improving economy all point to a broad office-market recovery.
Other sites with proposed office towers: the Irvine office of Phoenix-based Opus West Corp. plans 13-story, Opus Center Irvine III at MacArthur Boulevard and Main Street; and Irvine’s LBA Realty plans a high-rise at 2320 Main St.
Still, it may be about 18 months before rents rise high enough to justify some of the proposed buildings, according to Grubb’s Griffith. He said average class A rents need to be above $3 per square foot per month.
The average was $2.28 at the end of the fourth quarter, according to CB Richard Ellis Inc.
Rising costs of steel, concrete and lumber during the past few years, as well as higher land prices, have made the prospect of building a high-rise less profitable.
