The office market gained steam here last year but that didn’t help most commercial developers.
Orange County’s top 30 developers recorded 5.4 million square feet of commercial space developed here last year, a 16% drop from the 6.5 million square feet developed by the companies a year earlier.
That’s according to this week’s Business Journal list of local developers ranked by square feet developed in OC in 2004.
The list habitually is in flux. Totals for individual companies often swing wildly from year to year, depending on when large projects are finished. A large drop in square footage is not necessarily a sign of an industry on the decline.
Several developers who did no work in OC last year were included on the list,recognition that any one of them could bounce back this year. In fact, most were busy in neighboring counties last year.
The local decline in 2004 was due mostly to supply,the supply of land. It’s rare and expensive, developers said.
Some industrial developers said they could not afford land prices in the first half of 2004, which stalled or killed some deals.
Insatiable demand from housing developers is driving up prices of land in key areas of Irvine, Anaheim and other cities.
As the year wore on, building prices rose enough to enable developers to buy land, they said.
In another tack, Rob Guthrie, who heads No. 3 Costa Mesa-based Guthrie Dev-elopment Co., said more and more developers are buying existing buildings, dividing them, and selling the units much like a homebuilder sells condominiums.
These commercial condos typically share common areas, such as a lobby, and include associations to manage them.
He said these condos sell for just about as much as standalone buildings, which for the first time are going for more than $200 per square foot outside of South County in cities such as Orange and Anaheim.
“It’s a function of the market,” Guthrie said. “It’s hard to find small buildings.”
Last year developers also were hit by higher prices for steel, concrete and lumber. And unusually wet weather began as early as October, slowing some projects.
Guthrie said steel prices have stabilized but concrete prices continue to rise at 2% to 3% every few months.
Some developers cited rapid growth in China as driving up worldwide prices for construction materials. They point to China’s boom in construction of high-rises, bridges and roads as well as its growing manufacturing sector.
Steel alone rose anywhere from 40% to 60% last year.
Together the price hikes led developers to rethink some projects.
To gauge the impact of higher materials prices, William Lawrence, a senior vice president with Transwestern Commercial Services, said he recalculated the budget for a planned 10-story office high-rise in Irvine.
The company, which hopes to start construction on the building in August, is among a handful of developers planning high-rise office towers.
While the county is not likely to see a return to the go-go days of the late 1980s, a kind of mini boom appears to be in the works for high-rises.
Value of Projects Rises
Overall, commercial developers tackled 48 projects in 2004, about the same as a year earlier. The value of those projects shot up 22% to $1 billion.
Employment grew 4% to 3,163 workers among the top developers.
Irvine’s Centra Realty Corp. topped the list, rising one spot on a 34% gain in development work to 965,000 square feet. The company, founded in 2000, is a relative newcomer.
Centra has nabbed some big projects, both built-to-suits and speculative development.
Last year it finished work on Roger Cleveland Golf Co.’s new 130,00-square-foot headquarters in Huntington Beach. The golf gear maker, part of France’s Skis Rossignol SA, which is being bought by Huntington Beach-based Quiksilver Inc., imports parts from China and assembles the golf clubs here.
Centra’s biggest deal yet here is in the works: redevelopment of the Nabisco plant in Buena Park.
The developer is looking to demolish the iconic plant and put up some 300,000 square feet of shops, said Keith Ross, who heads Centra with partner George Peterson, in a previous interview.
The developer bought the site in November from Northfield, Ill.-based Kraft Foods Inc. for an undisclosed price.
No. 3 Guthrie Development rose a spot on a 45% gain to 702,972 square feet developed last year versus a year earlier.
“We felt it was time to get a little more aggressive, add to deal flow,” Guthrie said.
He said his company is developing more midsize buildings in the range of 20,000 to 50,000 square feet,Guthrie Development previously focused on buildings smaller than 10,000 square feet.
Among the larger projects the developer finished last year: Orange Industrial Park in Orange. Guthrie bought two buildings totaling about 140,000 square feet at the site and divided them into 23 units. The project sold out last year.
No. 4 BKM Development Co. did about 700,000 square feet last year, up 9% from a year earlier. The company wasn’t ranked last year,not because it didn’t do enough work, but because it slipped under the Business Journal’s radar.
Brian Malliet formed BKM, which are his initials, after leaving No. 6 Voit Development Co. in 2002. He’s kept a low profile until recently, developing projects in Anaheim and elsewhere.
Malliet has picked up the pace this year.
In May he paid about $40 million for Panasonic Corp. of North America’s 540,000-square-foot office and distribution campus in Cypress. It was one of the biggest industrial deals of the past few years.
Panasonic, a unit of Japan’s Matsushita Electric Industrial Co., still has some operations at the facility and is considering whether to keep them there.
Malliet plans to renovate the buildings and sell them.
No. 5 Birtcher Development LLC is another company which has flown under the radar. Birtcher did 451,000 square feet of development here last year, up 34% from the prior year.
Voit Development, a unit of Woodland Hills-based Voit Cos., dropped five places from the No. 1 slot on a 60% decline in development to 397,465 square feet.
The company finished some big projects in 2003, according to James Camp, who heads development for Voit. One big deal two years ago was the renovation and sale of a 500,000-square-foot building in Tustin that formerly was used by furniture maker Steelcase Inc. That year it also finished Voit Brea Business Park in Brea, which totals about 530,000 square feet, Camp said.
No. 9 The Irvine Company reported a 36% increase in development to 195,000 square feet. Projects included 680 Newport Center Drive.
This year a couple developers who did not provide square footages were dropped from the list: former No. 19 ICI Development Co. in Santa Ana; and the Cypress office of former No. 17 Warland Investment Co. in Santa Monica.
