The clock is ticking for residential developers looking to get entitlements for sites in the Irvine Business Complex during the current development boom cycle—and perhaps future cycles.
Developers are fast approaching the city-mandated, 15,000-unit cap on residential entitlements at the 2,700-acre swatch of land covering much of the southwest, industrial portion of Irvine near John Wayne Airport.
The city enacted the unit cap in 2010, and only a few thousand condos and apartments had been built over their prior decade, most notably in the form of several high-priced condo towers built before the last downturn that met a mixed reception from buyers.
Since then, the area has been among the largest sources of apartment development in Orange County, with a few dozen midrise rental projects built or moving ahead and plenty more in the queue.
For-sale home development has also returned to the area over the past few years, but not via condo towers as before. Infill builders are now increasingly looking to turn older industrial and office sites into more conventional townhome projects.
As of last month, 7,689 condos and apartments had been built in the IBC, and another 3,142 units were under construction, according to city records.
Large projects under way include a 267-unit phase of apartment development at the Park Place mixed-use campus for Newport Beach’s Irvine Co., and The Westerly, a 388-unit project at the intersection of Jamboree Road and Main Street headed by Irvine-based Sanderson J. Ray Development.
An additional 3,882 units have been entitled for the area but have yet to break ground, including a handful of for-sale housing sites.
That leaves just 287 units under the cap that aren’t spoken for, according to the city’s latest figures.
The IBC “has developed into a flourishing residential and mixed-use environment,” noted a report by Irvine’s planning division prepared for a May 23 city council hearing on the future of the area.
Not all has gone according to plan, city council members note.
Traffic in the area is “challenging,” and the IBC still lacks an appropriate amount of retail and restaurants to serve the growing base of residents, said Councilman Jeff Lalloway, a lawyer whose office is in the area.
The Republican is among the majority of council members that favor a wait-and-see approach toward any future increases in the area’s cap limit, as the city digests the current bout of residential development in the IBC.
The city council late last month approved a motion based on their staffs’ recommendations that it “send a clear message that no additional units beyond the cap will be supported” for the time being.
With so many projects approved but yet to break ground, not to mention the product now under way, “we want to stop and find out what the impact will be,” Lalloway said.
The halt on new entitlements could last “for one or two cycles,” he told the Business Journal.
Problems are likely to occur as a result of the hard stop on granting new entitlements, in particular issues facing affordable housing projects that are proposed for the subsequent years, said entitlement consultant Pam Sapetto, who spoke at last month’s council hearing.
Four-Horse Race
With just 287 residential units remaining under the cap, it appears to be a race to grab the remaining IBC entitlements.
The city said last month that it has received initial applications for four additional residential projects in the IBC totaling 673 units.
Any of the four projects would fall under the threshold, but all together, they would exceed the cap by 386 units.
City officials said late last month that the units “are not spoken for until they are approved.” They expect it would take between three and four months until a formal application is made for any of the sites, which would put the projects in front of Irvine’s planning commission and ultimately city council.
Locations now under consideration for residential development include:
• 17832 Gillette Ave., a site near Main Street and Von Karman Avenue that holds a roughly 50,000-square-foot industrial building. CoStar Group Inc. records show the property is owned by LBA Realty in Irvine.
• 16542 Millikan Ave., an industrial building near The District at Tustin Legacy shopping center that’s been used by Smarthome Inc. Colorado-based Rossmore Enterprises owns the building, according to CoStar.
• 2525 Main St., excess land next to a five-story office building that’s owned by Irvine-based J&R Group Inc.
• 17451 Von Karman Ave., a 91,420- square-foot industrial building long used by Deft Inc., a specialty coatings supplier.
Representatives of the Deft site say they believe their project was the first of the four under consideration to get a place “in line,” and as such should be processed first.
Recent conduct suggests that the city has changed its status toward the remaining projects, however, and “residential allocation suddenly became a ‘horse race,’” according to lawyers with Palmieri Tyler who are representing the current owners of the site, relatives of Deft’s prior owners.
Palmieri Tyler’s correspondence to the city on behalf of the Deft site refers to “potential litigation” if such a change in city processes moves forward.
Deft isn’t a stranger to litigation with the city when it comes to development in the area.
The company, a longtime business in the IBC, was one of the most vocal opponents of residential development in the area in prior years, joining other area firms and neighboring cities to fight the city’s plans for the area.
That litigation ultimately cost the city about $9 million, according to Mayor Don Wagner.
As part of the 2010 IBC Vision Plan that enacted the 15,000-unit residential cap, the Von Karman site where Deft has been located, as well as properties immediately bordering it, was designated as being outside the areas where residential projects could be built.
A general plan amendment appears to be required to redesignate the Deft site as being OK for residential development now; city officials last month declined to expedite the processing needed to get the work done.
Deft was acquired in 2013 by PPG Industries Inc. in Pittsburgh.
Retail Incentives?
While the city appears against approving residential development in the IBC in the near-term, retail development is a different matter.
Studies in November suggest that the IBC could support at least 203,000 square feet of additional retail space, and potentially a total of 538,000 square feet when residential development is built out in the area.
Only one significant ground-up retail project has been built in the IBC over the past decade, the 114,000-square-foot Diamond Jamboree shopping center.
The area got its first upscale food hall last month when Lincoln Property Co. opened the redeveloped Trade retail center on Michelson Drive.
“Currently there is a dearth of retail compared to the burgeoning residential projects” in the area, said Alethea Hsu, Diamond Jamboree’s president, in a letter to the city last month.
Irvine’s city council last month approved staff recommendations that additional analysis take place to identify area retail demand, and consider potential incentives to get those types of projects moving ahead.
