By SIMON DILLON
Cypress could be called the “Irvine Spectrum” of West County.
This masterplanned community is home to the North American operations of a who’s who of Pacific Rim companies, including Yamaha Corp., Mitsubishi Corp. and Panasonic, a unit of Matsushita Electric Industrial Co.
The city’s location along a straight line between the Port of Long Beach and the distribution centers in the Inland Empire make for an attractive corporate location for these companies.
Office vacancy in West County in the first quarter fell 31.4% to 7%, versus a year ago. Vacancy would be even lower if owner/user buildings, which are typically 100% leased, were included in the data.
Major deals that led to this absorption include the leasing up of Cypress Crossroads, which is owned by 10833 Valley View LLC.
The once-vacant building went through an extensive remodel by its former owner Makar Properties LLC, the Newport Beach-based owner and developer of the St. Regis Resort, Monarch Beach. High-end finishes were added to Cypress Crossroads.
The building attracted Germany’s Siemens AG to sign a lease for about 40,000 square feet, Ford Motor Credit Co. to sign a lease for some 20,000 square feet and several other tenants, including Countrywide Financial Corp., to fill most of the remaining space in the building.
Only two spaces remain at the 110,000-square-foot building.
Expect the vacancy rate to be much lower in the coming quarters as Mitsubishi, which recently vacated about 50,000 square feet at Cypress Corporate Plaza, 10805 Holder Ave., is factored into the results.
That space now has been backfilled by Yamaha, which took about 20,000 rentable square feet, Global Technologies, with 7,000 square feet, and two large deals about to be finalized totaling more than 30,000 square feet. Cypress Corporate Plaza is owned by Mammoth Equities LLC.
This recent leasing activity has prompted West County’s average lease rate to increase 10.9% to $2.04 per square foot per month this year. Typical annual lease rate hikes are up 2.5% to 4% on recent deals.
The slow, inefficient way that rents increase in office buildings represents a great opportunity for tenants.
Landlords tend to set escalations based on what the company down the street is doing versus what is actually happening and expected to happen to rental rates in coming years.
West County’s retail sector saw a 1.4% increase in average rents to $2.13 per square foot in the first quarter, versus a year ago. Vacancy was down 12.9% to 2.7%.
The manufacturing and warehouse sector recorded a 1.6% decline in rates to 62 cents per square foot, compared to a year ago. Vacancy was up 35.7% to 3.8%.
Lease rates for research and development space was down 6.6% to 71 cents per square foot in the first quarter. Vacancy was up 48.9% from a year ago.
Dillon is a vice president in the Newport Beach office of CB Richard Ellis Group Inc.
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