Amazon has struck its largest-ever single-building office lease in Orange County, snapping up a newly built office at the Spectrum Terrace development in Irvine, the Business Journal has learned.
Real estate sources say Amazon’s inked a lease for the entirety of 17300 Laguna Canyon Road, one of the three buildings built by Irvine Co. during the first phase of development at the mid-rise office park that runs alongside the San Diego (405) Freeway.
The four-story building runs 116,000 square feet. Shared space provider WeWork had initially planned to occupy the entire building, but never moved in. The company gave back the space around the onset of the pandemic.
Amazon’s uses for the space haven’t been disclosed, and the e-commerce giant couldn’t be reached for comment. Irvine Co. representatives also declined to comment.
There was no indication that a move into the space was imminent, based on a site visit to the campus last week. The building appears to still need a good amount of tenant improvements completed before it could be occupied.
The 116,000-square-foot deal is among the larger office leases reported in OC in recent months, and comes amid a recent period that’s provided some optimism for office landlords, many of whom have been hit hard as tenants transitioned to remote work during the pandemic.
The fourth quarter of 2021 saw, for the first time since the onset of the pandemic, positive net absorption in OC’s office market, with nearly 27,000 square feet of net gains, according to the latest data from the Irvine office of commercial brokerage Newmark.
OC’s base of offices, running around 96 million square feet, ended 2021 with a vacancy rate just under 16%, compared to 12.6% a year ago, according to Newmark.
A vacancy rate in the 10% range or lower is typically considered favorable for landlords in terms of their ability to raise rates and initiate new development projects.
Units of Amazon, including a gaming division, lease more than 100,000 square feet of space at the 20 and 40 Pacifica office towers on the other side of the 405 Freeway, according to prior Business Journal reporting. Amazon and CoreLogic have long been the largest tenants at those two towers.
Amazon has another 75,000 square feet or so of space elsewhere in the Spectrum area, according to data from real estate market tracker CoStar Group Inc.
Newport Beach’s Irvine Co. is also the company’s landlord at each of those buildings.
It’s not known whether Amazon’s existing operations in the Spectrum area will be relocated to Spectrum Terrace, or if the company is planning to expand its area base.
The website for Irvine Co.’s office division doesn’t show much space at the 20 and 40 Pacifica towers as being available for lease.
Alongside its office presence, Amazon’s quickly built up its base of leased, owned and in-development industrial sites in OC over the past few years, to several million square feet. It’s been by far the most active tenant in OC’s industrial market the past few years.
Amazon broke ground on a new, 145,000-square-foot distribution facility in the Irvine Spectrum in November. It paid $112.5 million for the land in late 2020.
Landlord Irvine Co.’s website for Spectrum Terrace indicates that the first two phases of development at the 70-acre project are now largely full, with no significant availabilities for lease.
Other notable tenants at the office part are data analytics software firm Alteryx Inc. (NYSE: AYX), CoStar, accounting firm RSM and software firm Kajabi.
Alteryx’s full-building lease at the complex, struck in late 2019, called for monthly rents starting at $3.30 per square foot at the outset of the long-term deal, rising to $4.06 per square foot after six years, according to regulatory filings.
Only a portion of the first two phases of Spectrum Terrace’s development are currently being used by tenants, and there’s several large blocks of space that have yet to be built out for those six offices.
Irvine Co.’s third and final phase of construction at the office park, a three-building addition totaling 345,000 square feet, is now well underway. That space is available for lease, according to Irvine Co.’s website for Spectrum Terrace.
Once built out, Spectrum Terrace will run about 1 million square feet.
The third phase of construction at the park now underway is among the largest office projects in OC currently being built, alongside the next phase of development at Irvine Co.’s low-rise Innovation Office Park going up a few miles away in the Spectrum.
Irvine Co. officials last week declined to comment on the status of leasing at its Spectrum Terrace project.
The Amazon deal adds to a collection of larger, full-building leases struck in Spectrum by Irvine Co. in recent months.
Hyundai Motor Group late last year picked the area for the engineering headquarters for a newly formed division, called Supernal, that aims to get flying taxis into service by 2028. It’s setting up shop in a building at Discovery Park that runs about 106,000 square feet.
Verizon also renewed a lease for a 119,000-square-foot building at its Spectrum-area campus along Sand Canyon Avenue, sources tell the Business Journal.