By MICHELLE MOWAD
Many in San Diego are asking if The Irvine Company will raise rents once its buy of Equity Office Properties Trust’s former buildings there closes in coming weeks.
Last month, the Irvine Co. said it is buying 17 buildings in and around La Jolla for an undisclosed sum. New York-based Blackstone Group LP is selling the buildings after acquiring Equity Office Properties in early February for $39 billion.
The sale is expected to close this month or in April. At that time, the Irvine Co. plans to take over managing the buildings, said Jennifer Heiger, spokeswoman for the Newport Beach-based company.
Heiger wouldn’t comment on whether rents may go up. A number of factors, including job growth, are strong points in determining rates, she said.
“Our expectation is the market will continue to strengthen over the long term for these very reasons and not because of any single office owner,” Heiger said. “In other words, the market will determine where lease rates go, not us.”
The Irvine Co. wouldn’t be alone if it does raise rates.
Los Angeles-based Maguire Properties Inc., which is buying Equity Office Properties’ former Orange County buildings, said it plans to raise rents by as much as 25% in the next three years. It also plans to increase parking fees at buildings.
The Irvine Co. deal reinforces San Diego as the company’s second largest market after OC.
The company has bought close to a billion dollars worth of office buildings in San Diego in recent years, including some of the city’s premier downtown towers.
It bought its first San Diego building some 25 years ago and is spending $60 million to renovate its San Diego buildings, Heiger said.
“Our long-term outlook and our commitment to reinvesting makes us unique and makes us a positive point in the market,” she said.
Gary Katz, director of acquisitions in Southern California for Westcore Properties LLC and president-elect of the San Diego chapter of National Association of Office and Industrial Properties, is betting on higher rents.
“I would expect that if the Irvine Co. raises rents that the rest of the market would follow,” he said. “San Diego is considered a very strong market by the rest of the country.”
There are benefits to having a more regional, even local landlord, according to Katz.
“It is good for continuity in the marketplace and it is a good landlord to have in the market because of their commitment to the future,” he said.
The Irvine Co. sees the value of the San Diego market, according to Graham Bryan, principal at Lee & Associates Commercial Real Estate Services Inc.’s San Diego-University Town Center office.
“This purchase solidifies their commitment to San Diego,” he said.
The Irvine Co.’s buy stands to bring its San Diego holdings to more than two dozen buildings.
The company already owns 10 buildings in San Diego, including downtown’s Symphony Towers, Wells Fargo Plaza, 225 Broadway, One America Plaza, 101 W. Broadway and 501 W. Broadway.
In January, the company bought a downtown site from Canadian condominium developer Bosa Development Corp. where it plans to build a high-rise office building.
Construction could begin in mid-2008.
In La Jolla, the Irvine Co. owns La Jolla Gateway and Eastgate Technology Park. It also owns Canyon Ridge Technology Park and Cornerstone Corporate Center in Sorrento Mesa as well as six apartment complexes in San Diego.
Mowad is a staff writer with the San Diego Business Journal.
