Local government agencies appear determined to prop up the local commercial real estate market with head-scratching property acquisitions.
The latest example: the OC Transportation Authority recently moved ahead with plans to buy an office tower in Santa Ana to serve as their new HQ.
Records indicate the agency is negotiating a deal to pay $54.5M for 2677 Main St., a 10-story office near Santa Ana’s MainPlace Mall, and a couple blocks from OCTA’s current HQ, which it leases. The Main St. building runs about 220,000 SF, larger than OCTA’s minimum space requirement of 150,000 SF.
The deal, if completed, would be the most expensive office purchase in OC this year and would work out to about $247 PSF.
Among OC offices larger than 100K SF, there hasn’t been a deal that’s topped $200 PSF this year, according to CoStar records. The priciest deal this year, the $53.7M purchase of Irvine’s 2020 Main St. tower near the airport, traded hands for about $198 PSF.
Two other office towers in Santa Ana each sold for about $150 PSF this year, and the Irvine Co. just sold a skyscraper in downtown San Diego for $84 PSF.
OCTA says that the deal will save the agency about $50M over the next 30 years, when compared to renting. It estimates it would spend $255M in rent over that time, records indicate.
That implies monthly rents averaging over $4.70 PSF, assuming an office in the 150K SF range. That’s nearly double the going rate for offices in Central OC, and close to rents for the best offices in Newport Center.
OCTA also expects to spend an additional $61M on tenant improvements and building out a boardroom and conference facility at the 2677 Main St. building.
The agency previously considered a build-to-suit project, among other options.
A suggestion for OCTA: move your HQ to an office that overlooks the 5 Freeway in South County, between Mission Viejo and Lake Forest, where the freeway’s been an abomination for several years running amid perpetual construction.
Perhaps having employees experience daily delays on that stretch of their commute will instill some urgency into the slow-moving project.
The OCTA deal moved ahead during an August meeting that took place around the same time the City of Irvine inked a nearly $97M deal to buy a new, yet-to-be-built industrial building, to be used for badminton and other uses.
It’ll be the most expensive single-building industrial deal in the city’s history, and works out to an eye-opening $880 PSF, well over double the typical PSF price for a high-end warehouse.
Evidently there’s even more cash to burn at Irvine City Hall. The city’s police department is now getting scrutiny for spending nearly $150,000 for a souped-up Tesla Cybertruck. It’s largely for show – to promote anti-drug programs at schools.
Did anyone at the city think to call Rivian (Nasdaq: RIVN) before approving that deal? The Irvine-based EV maker last year inked a deal with Laguna Beach to give the city free use of a couple of its vehicles.
Is anyone campaigning for Irvine City Council this November running on a fiscally responsible platform, and seeking an endorsement? Current councilmembers need not apply.
