Centra Realty Corp. is shopping a planned medical office project in Irvine.
The 41-acre site, near a pair of hospitals, has been approved for a mix of medical office buildings and retail space.
Irvine-based Centra had planned to build three medical offices totaling 150,000 square feet, as well as 7,200 square feet of retail space, at Alton Parkway and Sand Canyon Avenue. More than 20 acres of the Irvine Spectrum land is earmarked for agricultural use.
The planned Shady Creek Medical Center is across the street from Hoag Hospital Irvine, the former Irvine Medical Center taken over and renovated by Hoag Memorial Hospital Presbyterian of Newport Beach. Hoag Irvine is set to open in summer or early fall.
Kaiser Permanente, which operates Orange County’s largest health maintenance organization, has a 150-bed hospital at Sand Canyon Avenue and Alton Parkway that opened in 2008.
“The site is across the street from two major medical facilities,” said Scott Johnstone, a Newport Beach-based senior vice president for Grubb & Ellis Co. marketing the project for Centra. “That creates innate demand for the project just because of its proximity.”
An offering price hasn’t been disclosed.
Start Date?
If a buyer is found, construction on Shady Creek could get under way as early as 2011, according to Johnstone.
He said the development cost estimate for Shady Creek would be in the tens of millions.
Centra has a 65-year land lease with Rosemead-based Edison International’s Southern California Edison for the site.
The sale of project presumably would include the lease, which carries an average rent of $710,200 a year for 20 years, according to Southern California Edison.
Grubb & Ellis is marketing Shady Creek to doctors and more typical developers.
Monthly rents for space at the project have been advertised at about $3.25 per square foot, roughly 50 cents higher than the average rent for medical offices in OC.
If developed, Shady Creek could include large regional medical centers, surgical centers, service providers for government contracts that come out of healthcare reform, “all the way down to individual medical groups,” said Johnstone, who is marketing the property with colleague Greg Puccinelli.
During the recession, developers flocked to medical office buildings, which showed some resistance to the market downturn.
But a rush of development a few years ago pushed vacancy rates in South County—including the Irvine Spectrum area—to 12.4% in the first quarter, according to Grubb & Ellis.
Centra’s project was approved in 2008 amid a rush of medical office projects.
Sale Motive Unclear
It’s unclear why Centra is selling.
The developer couldn’t be reached for comment.
Reports suggest the project could be a tough sell amid a commercial real estate market that’s brought office development to a standstill.
OC’s medical office market totals about 251 medical buildings with 7.9 million square feet of space, not including hospitals and hospital-owned and occupied buildings, according to data from Colliers International.
For the county at large, vacancy rates stood at about 12% near the end of last year, according to Collier’s data. But for Irvine, which has seen more than its share of medical office condo development in the past five years, the vacancy rate’s closer to 25%.
In total, close to half a million square feet of medical office space has been built in OC in the past two years, according to brokerage data.
About eight projects, totaling 350,000 square feet of space, were built in Irvine alone during the past two years.
Johnstone doesn’t expect a challenge in finding tenants for a potential developer.
Recently enacted healthcare reform legislation should spark overall demand for medical office space, according to Johnstone.
“Previously, the medical community was in limbo not knowing, really, what the outcome (of reform would be), so it was hard for them to make decisions. Now, they have a clear path in making decisions,” he said.
