Office Space In a Down Market
By DANIEL D. WILLIAMS
Two projects from the Irvine office of Dallas-based Trammell Crow Co. illustrate the tenuous nature of Orange County’s office market:
& #149; The first is Arena Corporate Center, among the largest office projects to hit OC in years. The 383,250-square-foot office campus on 24.5 acres behind the Arrowhead Pond of Anaheim had long been one of OC’s prime undeveloped parcels.
Technically, Trammell Crow is building the project on speculation, although the company had one firm,Syndicated Office Systems Inc.,in his sights for some time, according to an industry source.
A unit of Santa Barbara-based Tenet Healthcare Corp., Syndicated Office has signed a 10-year lease for 127,750 square feet. Financial terms were not disclosed.
Arena Corporate Center accounts for the balance of office space under construction in Central County. Plans call for three, two-story office buildings. Each is set for 127,750 square feet and will form an “L” around a central plaza area and parking lot when they are completed (set for the end of the year).
At one time, the space was designated for residential and agricultural use. In 1998, the property was reclassified for commercial development and one plan, eventually nixed, called for a 982,000-square-foot, mixed-use center, including one 10-story and two six-story office buildings.
About 650 Syndicated Office workers will move from Santa Ana to the new digs next year. Syndicated outgrew its current space.
“The new office will be about 25% larger,” said Greg Harrison, a Tenet spokesman.
Arena Corporate Center is gaining interest from other potential tenants, though nothing firm has materialized so far.
Some speculate that bad timing hurt lease activity at the facility.
Arena Corporate Center began its marketing campaign during the soft market, according to Lonnie Riddle, a senior vice president in Grubb & Ellis Co.’s real estate advisory group in Anaheim.
“There’s a flat and even negative demand for space, and there’s ample space for tenants in existing buildings (in Central County),” Riddle said.
Although landlords have dropped rates in the past year, Anaheim’s office market has held up better than the John Wayne Airport area or South County, which have seen the brunt of the reductions.
Central County’s vacancy rate was 12.2% in the third quarter vs. 18.9% in the airport area and 15.2% in South County, according to Grubb & Ellis.
This year, the airport area has 495,840 square feet of negative net absorption, with South County showing a nice recovery of 508,030 square feet of positive net absorption. Central County has 111,909 square feet of positive net absorption through September.
& #149; A second Trammell Crow project hasn’t enjoyed the early lease results of Arena Corporate Center.
3121 Michelson Drive is a six-story, 146,700-square-foot class A office building in Irvine’s Park Place business park. Trammell Crow developed the project on speculation, and so far the building remains vacant save for 4,500 square feet occupied by Trammell Crow workers.
The office space was finished a month ago after a 12-month build.
About 65,000 square feet of space is under negotiation with multiple tenants, said William H. Lane, Jr., managing director of Trammell’s Irvine office.
“Our goal is to have at least 50% leased by the end of next year,” he said.
The builder is 3121 Michelson LLC, an investor partnership of Aliso Viejo-based Fluor Corp., Winthrop Financial Corp. and Trammell Crow. Michael Dorsey and Dave Kinney of Cushman & Wakefield Inc. are marketing the office building.
