Last week’s page 1 story on the state of the office market focused largely on the shaky signs facing landlords, tenants and investors of higher-end office towers.
For smaller and older office buildings in the county, many of the same trends,including rising rents and empty mortgage space,are being seen, said Steve Economos, senior vice president with the Newport Beach office of NAI Capital Commercial.
That said, the market for smaller office space may have taken less of a hit than the higher-end sector, said Economos, who specializes in sales of midsize office buildings.
“Like with the class A, institutional buildings, there’s been some mortgage fallout. But, unless the tenants are real estate-related, offices are full, and the (sector’s) still doing well,” he said.
On the sales side, small offices around John Wayne Airport remain the most active.
“Quality assets are still selling well. It’s the tertiary locations that are seeing slow sales,” he said.
NAI’s Economos Group,which also includes Steve’s father George Economos, Geoff DeWolf and Matt Moore,was involved in two decent-sized sales near the airport in recent weeks.
A 36,451-square-foot office plaza in Irvine, on Business Center Drive, sold for $9.6 million, or about $263 per square foot. Undisclosed investors bought the two-building property, known as Airport Plaza II.
In the second deal, a 17,272-square-foot office building at 2172 Dupont Drive in Irvine sold for about $4.3 million, or $249 per square foot.
The undisclosed buyer plans to occupy a portion of the Dupont Drive building. Demand remains strong for smaller buildings by buyers who plan to keep parts of those offices for themselves, Economos said.
The big change of late in sales is that speculative and first-time investors looking to buy buildings with a 25% or less investment of their own money no longer are able to find financing for deals, he said.
“There (are) no rookies. Only sophisticated players are buying now,” he said.
A few more airport deals in the works are likely to command near-record sale prices, despite the recent credit crunch, he said.
Near record sales prices for office towers are boosting leasing for smaller buildings, which have seen their own rate hikes.
The average monthly asking rent for class B office space around the airport was $2.49 per square foot, about 31% below rents for higher-end space, according to Grubb & Ellis Co.’s latest data.
In the third quarter, class B asking rents were up 3 cents from a quarter ago, and up 6.8% from a year ago.
The question to keep an eye on, Economos said, is if tenants at class B properties start looking to move back into towers in the next few quarters,assuming those landlords begin to drop their rental rates in order to lease up those buildings.
More Placentia Sales
The second of two buildings in a Placentia industrial complex has traded hands.
Oakland-based Carlwyn LLC just bought a 29,600-square-foot industrial building on 1639 E. Miraloma Ave., for about $4.9 million. Kana Pipeline Inc., a Placentia-based installer of water, sewer and storm drain structures, will occupy it. The building includes 7,000 square feet of office space.
Chris Migliori of Daum Commercial Real Estate Services represented the seller, Santa Ana-based Miraloma Properties II LLC. Wes Hunnicutt of Cresa Partners represented Carlwyn.
Last month, Daum brokered the sale of a 35,785-square-foot industrial building next to Kana’s new space, for $5.6 million. MJJ Partners bought that property from Miraloma Properties. It’s being leased to Mason West, an Anaheim-based seismic and vibration control equipment maker.
The Hanover Co., a developer of condominiums and apartments, bought an industrial site in Irvine slated for apartments.
The Houston-based company acquired a 116,000-square-foot flex building at 2801 Kelvin Ave., just off Jamboree Road.
Newport Beach’s John Laing Homes sold it for $33 million, or about $284 per square foot.
The land is entitled for 248 condos. John Laing originally planned a five-story project on the site, which was later changed to a four-story development.
The property last traded hands in 2005, for a reported $15 million.
Homebuilding Consolidation
Irvine’s Standard Pacific Corp. is consolidating some of its offices across the state.
In Northern California, the company is reportedly combining two local offices into one in Pleasanton. That will result in about 25 jobs at its Campbell office being lost.
At the same time, the company is merging its Central Valley operations, based in Salida, into its Sacramento office. About 10 of 35 people in the Central Valley lost their jobs in that transition, according to local reports.
