The remaking of the area around John Wayne Airport in Irvine could see more offices and a little less condominium development with the recent sale of St. John Knits International Inc.’s clothing factory.
The St. John building would have been ripe for condos at the peak of the housing market a year ago.
But new owner Hines Interests LP of Houston, which bought the building with pension fund California Public Employees’ Retirement System, is leaning toward an “office dominant” redevelopment, according to Douglas Holte, director of Orange County and San Diego operations for Hines.
Plans still are in the early stages. St. John, which had owned the building, leased it back until 2011. The company makes women’s suits at the building at Michelson Drive and Jamboree Road.
Condos are going up or are planned all around the site.
The St. John building is directly across from Lennar Corp.’s 1,380-home Central Park West development. Bosa Development Corp.’s finished condo towers are across Jamboree. A couple blocks away, Opus West Corp. and Geoffrey H. Edmunds & Associates Inc. are putting up a trio of condo towers.
With a slowdown in home sales, “the publicly traded homebuilders are out of the market on new deals,” said Tim Strader Jr., principal for Irvine-based Starpointe Ventures, a consultant to developers.
Most homebuilders aren’t looking for space to redevelop anymore. In some cases, they are looking to off-load land.
“It is only going to become more common, (considering) the softness in the residential market,” Strader said.
Developers still are bullish on the office market, which sports some of the best vacancy figures of any market in the country.
An office project also is an easier sell in the area, known as the Irvine Business Complex.
Approvals are easier since the area already is zoned for commercial uses with homes considered on a case-by-case basis. And office developers stand to face less resistance from other businesses in the area.
About 40 housing projects totaling about 14,000 homes are on the books for the Irvine Business Complex, an area long known for its offices, plants and warehouses. About half of those projects have been approved or are under construction.
But the biggest deals of late have been made with something other than homes in mind.
In August, Hines bought the 120,000-square-foot building next door to the St. John plant. The building is leased by Cisco-Linksys LLC, a unit of Cisco Systems Inc.
Redevelopment of that site is more likely to see offices than condos, though plans for that project also are at an early stage.
Hines’ “strong suit is office,” said Stephen Schloemer, senior vice president for the Irvine office of Colliers International. “But they can move pretty nimbly to alternative uses if it makes more sense.”
The company is building a 12-story, 265,000-square-foot office building with partner Crescent Real Estate Equities Co. about a half-mile away on Michelson.
As for condos, land prices aren’t near the stratospheric levels of a year ago, Schloemer said.
“A number of properties that a year ago would go residential are now back in play as offices or apartments,” he said.
Condo developers are “becoming more conservative to their approach to developing in the IBC,” said Brandon Johnson, an associate with Irvine-based land brokerage O’Donnell/Atkins, which worked on Hines’ St. John building buy.
The “transitional market allows for the development of more commercial projects, and we’re not seeing any lack of activity in the area,” Johnson said.
Some condo developers also could be scared off by the threat of lawsuits facing some housing projects in the area.
Drug maker Allergan Inc., one of the biggest businesses in the area, and Deft Inc., a maker of finishes and coatings, have sued Irvine to try and halt the city’s redevelopment plan for the area, which emphasizes housing.
Newport Beach and Tustin also have joined the litigation, out of concern for increased traffic and environmental issues stemming from condo development.
