Who would’ve thought that Orange County’s mid-section would be such a center of activity?
With Equity Office Properties Trust cautiously moving toward development of two new office buildings in Orange, other recent activity is bringing the spotlight to a submarket that in recent years has been a stepchild to other parts of the county.
“There has been so little construction for such a long time in mid- and North Orange County,” said John Herrrouin, a vice president at the Seeley Co. in Anaheim. “Vacancies have been going down for several years and the market has remained strong. So people are finally starting to think about building in the area again.”
Besides Equity Office, Spieker Properties has said it plans to develop more than 1.2 million square feet of new office space around the Block at Orange and Anaheim.
“There is pent-up demand in central Orange County,” said Mark Valentine, vice president of Spieker in Orange. “It’s been building for years and that gives a lot of people in the real estate community confidence the central and north markets will remain consistent performers in the future.”
Transwestern Commercial Services is another believer in the region. The Chicago-based firm has started preleasing 167,000 square feet of new office space it hopes to build later this year.
The building would go up across the street from Equity Office’s 500 Orange Tower.
“It’s an interesting horse race we’re all in,” said Doug Anderson, vice president of Transwestern in Santa Ana. “We’re all jockeying for position, trying to get our buildings going to start preleasing before the next guy.”
Polygon Development also has announced plans to build a 982,000-square-foot mixed-use project, Arena Corporate Centre, by the Arrowhead Pond.
“We’re still trying to decide whether we’ll go ahead and develop it ourselves or look at other options (with the land),” said H. Gordon MacKenzie, president of Polygon. “Everyone who owns land in the area is looking closely at what Zell is going to do.”
Regardless of what Equity Office does or doesn’t do, Summit Commercial of El Segundo is forging ahead with plans to build a $40 million, 250,000-square-foot, six-story office complex on State College Boulevard as part of Sportstown in Anaheim.
Ken White of Summit Commercial said his firm is targeting a May 1 start date for construction.
“We’re in the process of submitting final plans to the city,” he said.
White pointed out that only two buildings currently in the central submarket can accommodate a 30,000-square-foot-or-larger tenant.
“The vacancy rate in central Orange County’s Class A market is running about 7.6% right now,” he said. “It’s a real tight market and tenants looking for big blocks of space are having problems finding them.”
But are there enough large tenants looking to keep supporting more building?
White and others believe so. They use as examples projects like Stadium Crossings, which opened last month just 300 feet north of Summit Commercial’s site. The four-story Stadium Crossings preleased all of its 100,000 square feet of space.
Also buoying confidence among developers in the area is the strength shown by other new projects in other submarkets, particularly the recent completion of office towers in Irvine by Opus West and Koll Development.
“The success both buildings have had in filling space at relatively strong rental rates has made new development from the airport area north much more feasible,” said John Owen, managing partner of Voit Commercial Brokerage Inc. of Anaheim.
Many real estate developers questioned whether building two large towers next to each other in a market already full of high-rise development was a good idea, he added.
“But they’ve seen positive absorption continue there and throughout the county,” said Owen. “With Zell looking at building in this (Orange County) market, it just shows there is still a lot of confidence in the fundamentals of the local real estate market.”
