Three of the area’s biggest owners of high-end office space in Orange County, Irvine Company, LBA Realty, and Hines Interests LP—have proposed a handful of local office projects totaling close to 750,000 square feet for the area around John Wayne Airport and the Irvine Spectrum.
They would break ground in the next year or so, provided market conditions and tenant demand warrant the new construction, according to the developers and other real estate sources.
That would add to an already busy development pipeline in OC. Late last year, there was about 2.6 million square feet of office space under construction in the area, according to data from CBRE Group Inc.
First, however, each of the commercial real estate firms needs to address some significant vacancies in its portfolio of existing properties.
By the Business Journal’s count, the companies have big blocks of office space in Orange County totaling about 1.5 million square feet that’s either unoccupied or about to be vacated.
Filling the spaces could in some cases take precedence over new development.
Here’s a look at what’s on the three landlords’ near-term agendas in terms of leasing at some of their most notable properties.
URP Reinvention
Irvine Co., at the 36-building, 2.2-million-square-foot office campus it built and operates at University Research Park next to the University of California-Irvine, is preparing for the biggest give-back of office space the local market has seen since multiple mortgage companies vacated numerous buildings here around the onset of the last recession.
Broadcom Ltd., the largest office tenant in Orange County, occupies space at 11 buildings there, but not for long.
The company is in the process of building a new campus for its operations at Great Park Neighborhoods in Irvine, about 10 miles from University Research Park. It announced plans for the campus in late 2014 and plans to start moving its operations there around the end of the year.
Its existing buildings at URP, a mix of two-, three- and four-story offices totaling about 836,000 square feet, will be vacated and available for lease by June 2018, according to Irvine Co. marketing materials.
Irvine Co. has begun to market the space and has announced a multimillion-dollar redevelopment of the properties, with open-air gathering areas, new lobbies, and other tenant-friendly perks on the drawing board.
The Broadcom buildings will be offered for lease to multiple tenants, the first of which has already been announced. Toshiba America Inc. last month said it had finalized a lease for 96,000 square feet at URP buildings at 5231 and 5241 California Ave. It’s the largest new office lease reported so far this year in Orange County.
Irvine Co. officials said last month that Broadcom has agreed to move out of the two buildings ahead of schedule so that Toshiba can move in by October.
The URP leasing plans come as Irvine Co. is close to filling up the first of two 21-story towers it built in the Spectrum area, and is about to wrap up work on a pair of midrise offices at the Sand Canyon Business Park that total 212,000 square feet.
It also has plans to build an additional four three-story buildings at its Discovery Business Center near the intersection of Sand Canyon Avenue and the San Diego (5) Freeway.
Construction of the buildings, which would total about 317,000 square feet, was initially scheduled to start last year, but a definitive date for the kickoff of the Quad at Discovery Business Center hasn’t been announced.
Irvine Co., Orange County’s dominant real estate firm, doesn’t appear fazed by the impending loss of Broadcom.
“URP is currently 99% leased and has been consistently full for the past decade, which is among the reasons there is so much interest from companies desiring to ‘pre-lease’ the Broadcom space,” said Steve Case, executive vice president of its office division.
Irvine has a vacancy rate of 7.6%, the lowest of any major market in Orange County and below the overall county rate of 9.7%, according to CBRE.
Toshiba Turnaround
Irvine Co.’s gain of Toshiba America as a new tenant at URP comes at the expense of Irvine-based LBA Realty, the new owner of the Spectrum-area property where the technology manufacturer is currently housed.
A departure was expected, though. Toshiba America, which makes a variety of electronic components, information systems and logistics products, announced plans to relocate its local operations last year following the sale of its main Irvine facility to LBA Realty for about $65 million.
The 9740 Irvine Blvd. facility has about 450,000 square feet of office, manufacturing, warehouse and distribution space and is one of the largest buildings available for lease in OC.
LBA is considering a few strategies for the campus, including turning it into a multitenant facility, according to real estate sources. Definitive plans for the site, near the intersection of Irvine Boulevard and Alton Parkway on the southern edge of the former El Toro Marine base, haven’t been announced.
Potential changes could include upgrades to the main office building, which has close to 100,000 square feet, and to the nearly 350,000 square feet of industrial space, according to sources familiar with the property.
The Toshiba site is one of two large chunks of existing space LBA is trying to lease out in Irvine, along with about 183,000 square feet of space at its Park Place campus near John Wayne Airport that was vacated last year by the California Department of Transportation. CalTrans relocated its local operations to a smaller office in Santa Ana last year.
A portion of its old space at Park Place has a new occupant. San Diego-based chipmaker Qualcomm recently signed a lease for about 25,000 square feet there. It will move its local operation from a location in the Spectrum area.
LBA Realty has its own office development plans in the works. It’s started to market space for lease at a six-story office it’s planning at the Park Place campus, which it runs.
The proposed 184,000-square-foot office at 3181 Michelson would sit alongside the San Diego (405) Freeway near the intersection of Jamboree Road and Michelson Drive.
It would be the first new office at Park Place since a 20-story tower at 3161 Michelson opened in 2007.
The Gensler-designed office would include floors about 34,000 square feet in size on average, larger than the floor of a typical high-end office in the airport area.
In addition, the “building will have a signature 34,000-square-foot showroom space orientated toward I-405, providing a one-of-a-kind branding and opportunity for future tenants,” say LBA’s marketing materials for the project.
Other real estate sources tell the Business Journal that LBA plans to start construction on the office by the end of the year, provided it can get some leasing momentum.
Busy Intersect-ion
A similar strategy is playing out about a mile away from Park Place, where the local office of Hines Interests has proposed a nine-story office at 17850 Von Karman Ave. that would total 237,000 square feet.
Hines isn’t planning to break ground on the nine-story tower near the intersection of Von Karman Avenue and Main Street without first signing tenants.
The developer also has its hands full with the four-building Intersect campus office property it owns close by. It and Newport Beach-based Pacific Investment Management Co. paid a reported $121.5 million for the 15-acre campus in 2015.
The new owners are almost finished with the bulk of a $23 million reinvestment in the complex, whose buildings total about 430,000 square feet.
Intersect previously held the local operations of Washington Mutual Inc. About 363,000 square feet were vacant when Hines and PIMCO bought it, according to Hines officials.
Tenants including Mazda, RapidScale and AON Financial Services recently signed deals totaling close to 80,000 square feet, and another 80,000 square feet in deals were nearing completion late last year, the developer said.
