Talk about conflicting forces.
The long hoped for resurgence in the county’s office market is here, while the biggest takers of office space in recent years,mortgage companies,are under increasing strain.
Orange County’s overall vacancy rate dropped to 7.3% in the third quarter, the lowest rate since the 1980s, according to Voit Commercial Brokerage LP. It was 10.5% a year ago.
When technology companies were big takers of office space, the rate bottomed at 7.9% in the second quarter of 2000.
In the past year, the average office rent here has shot up 10% to $2.26 per square foot per month, according to Voit.
Jerry Holdner, vice president of market research for Voit, said with seven consecutive quarters of rising rents the county is set to hit a record in the fourth quarter.
Mortgage companies, meanwhile, are struggling amid rising interest rates and intense competition for customers.
Last month, two lenders based in the county slashed their dividends: Newport Beach-based Impac Mortgage Holdings Inc. and Irvine’s ECC Capital Corp.
Impac, a real estate investment trust that invests in mortgages, cut its quarterly dividend from 75 cents a share to 45 cents. ECC, a real estate investment trust that makes mortgages to borrowers with imperfect credit, lowered its quarterly dividend from 22 cents a share to 18 cents.
Irvine-based New Century Financial Corp., another subprime mortgage REIT, said last month its profits for the year would fall short of expectations,the company’s second profit warning this year.
Impac and New Century have signed some big office leases this year.
In June, New Century signed a lease for 190,000 square feet with Los Angeles-based Maguire Properties Inc. for space at a proposed high-rise at Park Place in Irvine.
The lender announced earlier this year it had signed a lease with Maguire for 179,000 square feet of space at Park Place.
In March, I wrote that Impac signed a deal with Scholle Corp. to take an entire 200,000-square-foot building under development in Irvine.
Still, even if the mortgage industry faces a significant correction, the office market will be just fine, according to Voit’s Holdner.
“Let’s say the mortgage companies did have a problem and gave back 2 million to 3 million square feet, which would be a worst case scenario. We would still be at less than 10% vacancy in the county,” Holdner said. “Whenever the rate is below 10%, it’s a strong market.”
Back in Action
George Argyros continues to re-entrench himself in OC’s real estate scene.
Earlier this month, Santa Ana-based title insurer First American Corp. said Argyros has rejoined the company’s board.
Argyros, head of Costa Mesa-based real estate investor and developer Arnel & Affiliates, resigned his seat on First American’s board in 2001 when President Bush appointed him as ambassador to Spain.
Before that, Argyros spent 13 years on First American’s board.
Argyros returned from Spain after Bush’s re-election in November.
In the past few months, the former ambassador has spoken at meetings for Chapman University’s new real estate institute. And he’s busy doing deals.
Back in May I wrote Argyros was tackling his first big real estate deal since returning here: the redevelopment of a Super K site in La Habra.
His company plans to renovate the 180,000-square-foot building and add an additional 40,000 square feet to the former Kmart store.
Arnel is teaming with Irvine-based Hopkins Real Estate Group on the project.
Who’s Roger Hobbs?
Whoever he is, he’s got some cash.
Roger Hobbs came out of obscurity last month with his $10 million donation to Chapman University for its planned institute for real estate, law and environmental studies. The institute will bear his name, and he’s set to head it.
Recently, Hobbs moved his Orange-based R.C. Hobbs Co. into a $5 million building he acquired earlier this year at 1110 E. Chapman Ave. and refurbished it.
The 20,000-square-foot, two-story building, dubbed Atrium Professional Centre, is 90% occupied, Hobbs said in a statement.
Aside from Hobbs, tenants include Century American Development Corp. and several medical and professional firms.
Rick Reiff, the Orange County Business Journal’s executive editor, shed some light on Hobbs in a recent Insider column. Hobbs left the OC scene during the 1990s real estate lull to spend time on his 6,000-acre cattle ranch in Montana.
That explains why nearly everyone, meaning the editors here and myself, had no idea who Hobbs was before he gave money to Chapman. Turns out he’s developed, acquired and managed $1 billion worth of properties in 30 years.
