Orange County’s dominant landlord is taking its recent blueprint for high-rise office development in the Irvine Spectrum and turning it sideways.
Irvine Company executives last week confirmed plans to break ground on what they described as six cutting-edge, low-rise office buildings on land it owns along Sand Canyon Avenue that’s about a mile from the Spectrum shopping center.
The offices will be at the company’s Discovery Business Center and Sand Canyon Business Center campuses and total about 529,000 square feet.
They’ll include a variety of new design features and workplace amenities that are increasingly in demand from top tenants, the Newport Beach-based company said.
Construction of the buildings—whose design the landlord calls “Next Gen Campus” offices—should start by early next year and be finished in 2017, according to Doug Holte, president of Irvine Co.’s office division.
The buildings and the likely start of a 20-story high-rise planned for the 400 block of Spectrum Center Drive mean Irvine Co. could break ground on nearly a million square feet of speculative office space in the Spectrum area over the next year.
The slate of office development will cost Irvine Co.—whose chairman and owner, Donald Bren, is Orange County’s wealthiest person (see OC’s Wealthiest profile in pullout section)—an estimated $300 million-plus to build.
The development push comes as Irvine Co.’s local office portfolio is essentially fully leased, with about a 4% vacancy rate for an estimated base of 16 million square feet.
Tenants seeking 20,000 square feet or more have only a handful of options at existing Irvine Co. buildings in OC, particularly for low- and midrise office space, said Steve Case, executive vice president of the company’s office division.
Rents
Rents for Spectrum-area offices are generally still about 7% below what most developers here typically need to justify kicking off construction. The average asking rate for office space in the Spectrum area is now about $2.78 per square foot, per month, according to data from Voit Real Estate Services.
Monthly rents of $3 or higher are usually cited as a baseline for a profitable office development here.
The local office market still has plenty of room to grow, Holte said.
“We’ll be delivering these (buildings) a little ahead of the market.”
Irvine Co. sees the area’s economic growth continuing strong for “years, not months or quarters,” he said.
Delivering the new buildings quickly will give it a jump on other developers’ office plans elsewhere in the county, Holte said.
More than 2 million square feet of speculative office space has been proposed for non-Irvine Co. projects in the area around John Wayne Airport.
Next Gen
The larger of the two low-rise Spectrum projects is called the Quad at Discovery Business Center.
The four-building project next to the Santa Ana (I-5) Freeway and the company’s 24-building Discovery Business Center campus will feature three-story offices and run 317,000 square feet.
Also planned is a pair of new four-story offices at Sand Canyon Business Center about half a mile south of Discovery Business Center, whose five existing buildings run 454,000 square feet.
Verizon Wireless leases three of the existing buildings, which it uses for a regional operations hub.
The two new buildings planned for the Sand Canyon Business Center will run about 212,000 square feet.
Design features for both projects include floor-to-ceiling glass and aluminum curtain walls that will allow for lots of natural light and energy efficiency. Amenities will include fitness and wellness centers, bike-sharing programs, outdoor workspaces, and sundecks, the landlord said.
The glass-clad design and amenity package for the low-rise buildings will in many ways mirror features at the 200 Spectrum Center tower, Irvine Co.’s most notable office project under way in the vicinity, according to Case.
The 21-story, 425,000-square-foot building, Orange County’s tallest office, is scheduled to open next spring. The company’s in talks for a number of significant leases for the speculative tower, but nothing has been finalized for the building, Case said.
Assuming leasing goes well for the building, a second tower in the 400 block of Spectrum Center Drive would begin next year, according to Holte.
The company’s extensive research shows there’s market demand for what the landlord calls “next-gen” office space, both in the form of high-rise buildings and low-rise product, Case said. Prospective tenants want either the prestige of the former or the easy accessibility of the latter, and area developers planning offices that fall between the two product types could face leasing challenges, Case said.
Lessons Elsewhere
Other Irvine Co. office markets are playing their part in the latest phase of OC development.
In San Diego County’s University Towne Centre, Irvine Co. is embarking on a similar, albeit smaller, development strategy. It recently finished work on One La Jolla Center, a 15-story tower whose construction cost has been estimated at more than $100 million.
It’s also building a pair of three-story buildings near the 306,000-square-foot tower, which recently announced Virginia-based technology company Neustar Inc. as its first tenant.
Case describes the 15-story One La Jolla Center building as a “cousin” of the 200 Spectrum Center tower in Irvine in terms of architecture, design and workplace amenities.
Along with column-free floors, flexible office designs, and a variety of energy-efficient building systems, the La Jolla and Irvine towers also sport a sleek, glass-clad architectural style not unlike the trio of skyscrapers Irvine Co. acquired in the past few years in Chicago.
Silicon Valley
In the Silicon Valley, another hot market for California’s largest office landlord, Irvine Co. has been paying close attention to the office needs of the market’s giant technology companies, Holte said.
Buildings that can “simplify” customers’ lives while enhancing the workdays of employees can help cutting-edge companies like Apple , Facebook, and Google attract and retain employees, in addition to making for a more productive work environment, Holte said.
“We’ve been listening carefully to our customers,” said Holte, who likened to the new low-rise projects on tap for the Spectrum to a pair of developments the company has undertaken in Santa Clara.
