Earlier this year, the last undeveloped commercial parcels of Aliso Viejo were snatched off the market.
Now, another major chunk of South Orange County real estate set aside for development appears to be close to selling out.
Saddleback Associates has struck a preliminary agreement to purchase 5.2 acres in Rancho Santa Margarita. The deal, combined with a pending purchase by Brookhollow Group of 8 acres there, will bring to a close nearly two decades of land sales for office and industrial property set aside in that masterplanned unincorporated section of Orange County.
“Those are the last pieces of property in the entire 400 acres designated for business in the early 1980s,” said Tom Gilmer, senior vice president of Lee & Associates in Orange.
Brookhollow is planning to build a trio of two-story office buildings totaling 111,500 square feet across from Cox Communications’ new Orange County headquarters on Avenida Empresa. The $19 million project is expected to begin construction next fall and be completed by June 2001.
The CB Richard Ellis team of Carol Trapani, Tyler Mattox and Ted Snell will be marketing the complex, to be called Brookhollow Office Park.
“We’ve done so many projects in Rancho Santa Margarita,” said Jeff Kaplan, executive vice president for the Costa Mesa-based Brookhollow Group. “Most of the supply so far has been for industrial, but we feel like there is a need for office product in that area.”
More than 1 million square feet of commercial space has been built in Rancho Santa Margarita during the past four years, he added.
“We’ve built a half-million square feet, not including the projects we are working on to-date,” said Kaplan. “Along with Saddleback, we’ve been the major players in that market.”
Like Saddleback, Brookhollow bought the final parcels in the unincorporated part of Orange County,which next year is scheduled to become a city,from Rancho Santa Margarita Co., a partnership with Metropolitan Life as its major participant.
“Land is so tight in South Orange County, we like to grab it whenever something comes available,” said Brian Fronk of Saddleback. “This opportunity has presented itself and we plan on taking advantage of it.”
Saddleback is making plans to build a new industrial park on its newly purchased site, tentatively named Tomas Business Park. The 12-building complex, which will cost an estimated $7 million to complete, has been targeted for small industrial users needing anywhere from 5,000 square feet to 9,000 square feet of space.
If the deal goes through, Lee & Associate’s Gilmer,who is marketing the site,says he would have the distinction of being one of the last to broker a deal for undeveloped land in Rancho Santa Margarita along with one of the first.
“I was involved with a deal in 1986 that was, if not the first, one of the earliest land transactions in that area,” he said. “We’ve been through a recession in the early ’90s that effectively halted development for four years in Rancho Santa Margarita. But other than that, it has grown steadily ever since.”
Surprising Growth
The deal would also bring to 65 the number of buildings developed in the Rancho Santa Margarita market by Saddleback , 49 of which have been built in the past two years.
“We like that market and have already had some inquiries about the park,” said Fronk, whose latest development in the area would go up near Tomas and Esperanza streets.
Besides Gilmer in Orange, Mike Baker and Guy LaFerrara of Lee & Associates in Irvine also will be marketing the new business park once a deal goes through.
“The growth has surprised a lot of people,” said LaFerrara. “With Coto de Caza and all of the influential housing that has been built there, that has helped draw people to Rancho Santa Margartia.”
But as land prices have gone up, so has the type of product being built in the area, he added.
“We’ve seen a lot of flex space going up recently around there,” said LaFerrara. “It’s cheaper to build and developers are getting more bang for their buck. The typical office tenant can now move into a flex-tech building for half of what a typical Class A office building would cost.”
Reaching Build-Out
With land tight in South Orange County around Lake Forest, Rancho Santa Margarita and Foothill Ranch, he believes that portion of the county is built out.
“You’ll see some development from owners that have purchased land in the past,” said LaFerrara, “But in the next year and a half, you’ll see a big slowdown as the remaining vacant land is developed.”
As recently as six years ago, land in Rancho Santa Margarita was running around $5 a square foot. In recent months, it has been going for around $15 a square foot as construction and other costs have risen, said LaFerrara.
He sees a build-out in the Rancho Santa Margarita submarket as a sign of a gradual shift in activity.
“We’ll see the existing product absorbed and lease rates increased,” said LaFerrara. “With that, we’ll see a larger building push to new areas further south.” n
