The heat is on office rents.
Second-quarter figures are rolling in from commercial brokerages. They’re showing rents on the rise and vacancies on the decline. Brokers predict further pressure on rents this year.
Voit Commercial Brokerage LP pegs the county’s average asking rate for office space up 9% to $2.19 per square foot per month versus a year ago. CB Richard Ellis Group Inc. calculates a 6% jump to $2.10 versus a year earlier.
The numbers from various brokerages vary slightly but typically show the same trends.
Brokers said the economy appears to be on solid ground, which is leading to demand for office space from a variety of companies. Mortgage companies still are a factor. But more traditional users, such as lawyers and financial services companies, also are taking more space, brokers said.
Meanwhile, construction is limited.
Orange County’s office vacancy rate dipped to 8.3% in the past few months, down from 9.5% at the start of the year, according to CB Richard Ellis. The low vacancy is notable, since it was above the key psychological level of 10% last year.
Voit calculates the vacancy rate at 8.9%.
There’s actually more “available” space out there, according to brokers. The vacancy rate is from the landlord’s perspective. If you add in space companies are looking to sublease, the total is closer to 11.2%, according to Voit, down from 14.6% in the first quarter.
From Voit’s report: “Lease rates are expected to continue to increase at moderate levels, and concessions will continue to lessen as the economy in Orange County continues to improve. These conditions will put upward pressure on lease rates going forward. We should see lease rate growth of 10% to 15% in 2005.”
Beyond Irvine
So there is life outside of Irvine when it comes to commercial real estate.
CB Richard Ellis pointed that out recently with word that a trio of its brokers closed 18 deals in one month, mostly in North and West Orange County and in South Los Angeles County.
Steve Batcheller and Josh Bonwell in Anaheim and Rick McGeagh in Torrance closed 15 leases and three sales during a 30-day period ending in mid-June. The leases total more than 516,000 square feet for about $19 million.
The sales total more than 695,000 square feet for about $61 million.
The area bordering OC and L.A. is known as mid-counties and is popular among companies that distribute goods. As well as being close to two counties, the area is near the ports of Los Angeles and Long Beach and sports a number of freeways.
“These transactions are symptomatic of the region’s overall dramatic increase in net absorption, which for the first time since 2000, has been positive for five consecutive quarters,” Batcheller said.
The three sales by the Batcheller-McGeagh Industrial Team included the following:
Costa Mesa-based BKM Development Co. acquired the 543,000-square-foot campus of Panasonic Corp. of North America, a unit of Japan’s Matsushita Electric Industrial Co., in Cypress. Brian Malliet, who heads BKM, said in a past interview he hopes to spruce up the two buildings and resell them. Panasonic may keep some operations there.
Pasadena-based Wescom Credit Union bought a 117,523-square-foot building at 5601 E. La Palma Ave. in Anaheim from Laguna Niguel-based Birtcher Anderson Realty LLC, which is moving to San Juan Capistrano. The sale price was about $17 million. Wescom is expanding to include auto, homeowners, life and health insurance with its acquisition earlier this year of Pico Rivera’s Hallmark Associates Insurance Services.
Kissak Saragian bought a 34,800-square-foot building at 13855 Struikman Road in Cerritos from TA Western for $2.9 million.
The final price tag on a fire last month at Windstar Stadium Lofts in Anaheim is probably close to $5 million, according to Eric Heffner, a principal with San Diego-based Nexus Properties Inc.
The fire also should lead to some apartments being finished about three months later than planned, he said.
Windstar Communities LLC, the residential arm of Nexus, was building 390 luxury apartments when a fire started in early June. It destroyed about 60% of the two-story wood frame and damaged part of a four-story parking garage also under construction.
The project, at State College Boulevard and Katella Avenue, is the first to make use of new optional zoning near Angel Stadium of Anaheim that allows for housing mixed with shops and other uses.
Windstar broke ground in December and plans to finish in 2006.
The cause of the fire is under investigation.
“I don’t really understand why someone would do that,” Windstar’s Heffner said regarding the possibility of arson.
He added: “Anaheim’s fire department was outstanding. They did an outstanding job to keep the damage to a minimum. All of the City Council and the staff have rallied behind us.”
About 80 firefighters from Anaheim, Garden Grove and Orange fought the blaze, according to the Orange County Register.
Heffner said he has beefed up security at the site. He declined to elaborate.
