Foothill Ranch, which has faced years of fierce competition for corporate office tenants in South Orange County, is suddenly hopping.
Within the past several weeks, a string of new developments have taken place in the Lake Forest masterplanned, mixed-use development.
Besides previously announced projects, more than $100 million in new investment and leasing deals are in the works.
Among those are:
n The Foothill Ranch Co. and Bob Searles are moving forward with plans to co-develop a new $40 million, three-building office complex in the area. The 290,000 square feet to be developed will be called Foothill Plaza.
n Opus West Corp. has entered negotiations with Black & Decker to sell a 127,500-square-foot complex under construction in Foothill Ranch, according to sources.
n Less than a mile away, online grocer Webvan Group Inc. is preparing to enter the Orange County market by striking a build-to-suit deal with the Sares-Regis Group for a new $40 million-plus development on almost 15.5 acres in Foothill Ranch.
All three developments come as another 210,000-square-foot project in the area, Towne Centre Plaza, is nearing completion. The joint venture by Searles and The Foothill Ranch Co. has signed contracts or letters of agreement for 75% of the project’s space,before any of the three low-rise office buildings open.
The only one of those deals that has closed, with Pacific Life Insurance Co., is believed to be worth about $20 million, or nearly $2.10 a square foot.
Market on the Rise
Developers point out that for a mixed-use project where monthly office rental rates as recently as a year ago were running in the $1.70-to-$1.80-a-square-foot range, such deals reflect a market on the rise.
“When we started building there in 1997, Foothill Ranch was perceived as a low-cost alternative to the Irvine Spectrum,” said Tim Strader, manager of real estate development for Opus West in Irvine. “But now we’re seeing the situation changing.”
Although he refused to talk about Black & Decker, Strader did say that Opus West has recently completed more than 30,000 square feet in deals to lease other completed space developed in Foothill Ranch. Rates for full-service-gross contracts in those transactions also broke the $2-a-square foot barrier.
“Rent appreciation is catching up with the rest of the South County market, at least for the higher-quality buildings,” said Strader.
At Foothill Plaza, Searles’ DevCorp and the Foothill Ranch Co. are preparing to break ground by June on a pair of three-story office buildings. The speculative project will be followed by an 80,000-square-foot complex in February 2001 and two restaurants to complete the 18-acre development, which is about a half-mile from the Towne Centre Plaza.
While Pacific Life announced last week it was signing to become the project’s first tenant, Searles believes another 43,000 square feet are close to being taken.
Towne Centre Plaza, in Foothill Towne Centre, is being co-developed for about $27 million by the Operon Group,for which Searles is a partner,and the Foothill Ranch Co.
Meanwhile, Black & Decker is negotiating to buy a three-story office building from Opus West, sources said.
The complex, which is scheduled to be finished around August, is going up in a market where asking rates to purchase new office developments are ranging from $165 a square foot to $175 a square foot.
The building is the fourth and final phase of Opus West’s 420,000-square-foot Foothill Corporate Plaza project. It is being designed to be completed only as a basic shell, which would lower costs to a buyer substantially below the going rate for fully built-out projects, according to sources.
Black & Decker Has Been Looking
Black & Decker has been in the market for months. Besides Opus West’s building, the company has been considering other Orange County sites, including Birtcher Real Estate Group’s Serrano Creek office campus in Lake Forest.
Black & Decker is looking at consolidating several area offices and moving hundreds of employees to a single complex, according to sources.
Whether Black & Decker winds up at Foothill Ranch or not, local observers say the interest it and other major corporations are showing in the area reflects increasing demand for office space at the development.
When combined with past events, Searles sees Foothill Ranch becoming a major base for employment growth in South Orange County.
Pacific Life’s Impact
“Foothill Ranch is building a significant labor force of skilled and high-tech workers,” he said. “In particular, Pacific Life’s move here is a big boost for the entire area.”
Pacific Life plans to move 450 employees from several offices around Newport Center as well as a Fountain Valley office when its new 7 1/2-year lease begins in June.
“Since the buildings are within Town Centre Plaza, they have excellent amenities for employees,” said Chris Deason, vice president of Voit Commercial in Irvine who represented Pacific Life in the transaction.
“We also liked this location because the landlords provided us with a lot of flexibility for further expansion,” he added.
Pacific Life initially will occupy all three floors of one building at Towne Centre Plaza and a single floor of a second office at the site. The company will take a total of 93,000 square feet to start with, but also has signed to occupy about 12,000 square feet more within a year.
The move will involve only a portion of Pacific Life’s OC workforce. At its headquarters in Newport Beach, which will remain the HQ, the diversified insurance and financial services provider currently has 1,800 employees. It has a payroll of more than 2,200 in Orange County and a total workforce of 2,900 worldwide.
Pacific Life had been considering expanding by 420,000 square feet along Newport Center Drive and another 180,000 square feet nearby. But company officials say they haven’t made a decision whether to continue with the project after slow-growth activists qualified the so-called Greenlight Initiative for the November city ballot (see related story on page 8).
The proposal would essentially force a vote by the general public of any new commercial or residential development project more than 40,000 square feet. Since it qualified last month, the Irvine Co. has pulled out of plans to expand its mixed-use Fashion Island development and other major projects in Newport Beach.
‘Managing Growth’
“We’re currently evaluating the situation,” said Pacific Life spokeswoman Marie Connell. “Signing a lease in Foothill Ranch is a short-term solution to a long-term problem of trying to manage our growth.”
Whatever it does in the future, area brokers believe the signing of the insurance provider to Foothill Ranch’s growing lineup of corporate users represents a major step forward.
“Pacific Life moving here, along with all of the other activity going on around Foothill Ranch, is bound to attract even more interest to this part of South Orange County,” said Mark Zuvich of Cushman and Wakefield in Irvine.
“A tenant like Pacific Life validates the Foothill Ranch market for major corporate users,” said Don Nourse of CB Richard Ellis in Newport Beach, who also helped broker the deal. “It brings into focus the various alternatives in South Orange County.” n
