Area office owners are super-sizing the latest crop of creative-office redevelopment projects on tap in Orange County.
The first batch of office projects featuring creative-office aspects appeared in the past two years, with open workspaces, exposed ceilings, plenty of natural light, and a mix of indoor and outdoor meeting space, though they tended to be limited to low-rise buildings 50,000 square feet and smaller.
Now developers, facing a dearth of quality office space for larger tenants, have begun to turn their attention to larger projects after seeing the leasing success of the earlier projects and the rental premiums renovated buildings can command. Several cutting-edge buildings approaching 100,000 square feet and larger are in line for redevelopment across the county.
The latest addition to the creative-office marketplace is Bixby Land Co.’s 33.7 North, a 96,000-square-foot office on Red Hill Avenue in Tustin.
Newport Beach-based Bixby bought the former industrial facility across the street from the Tustin Legacy development site about a year ago and spent nearly $12 million renovating it before holding a grand opening event last week.
It’s so far Bixby’s largest creative-office redevelopment project in Orange County. The investor and developer, which also has completed a number of larger creative-office projects in Silicon Valley and Los Angeles in the past few years, also plans to convert a 262,463-square-foot industrial building in the Irvine Spectrum into a cutting-edge office following the departure of tenant Kawasaki Motors Corp. USA this year.
Bixby bought the building at 9950 Jeronimo Road last April for a reported $44.6 million, and Kawasaki subsequently announced plans to move its operations to Foothill Ranch.
The purchase was made with an eye to meeting “the growing demand for modern work spaces in Orange County, especially from larger tenants,” Bixby officials said at the time of the acquisition.
“Good, large blocks of space are in short supply,” said Bill Halford, Bixby’s chief executive.
It isn’t just older, stand-alone industrial and office buildings that are getting the creative-office makeovers. Some of OC’s best-known high-rise and mid-rise office campuses also are getting into the act, incorporating features that cater to tenants seeking less formal offices.
“It’s how people want to work today,” said Edward Cook, co-president of Costa Mesa-based McCarthy Cook & Co.
McCarthy Cook last month partnered with Madison, N.J.-based Prudential Real Estate Investors to buy MetroCenter at South Coast, a three-building office complex in Costa Mesa totaling about 800,000 square feet.
The campus sold for about $230 million, according to CoStar Group Inc. records, in the largest office sale of 2015.
The new owners are planning a major renovation of the 17-acre campus, which also includes a 51,000-square-foot 24 Hour Fitness health club.
They plan to add a host of creative-office flourishes, extensive outdoor amenities, and other property upgrades on par with those at cutting-edge office properties in Silicon Valley.
The project will cost more than $10 million, officials said.
See-through windows and sliding doors will be added to the first floors of each of the three offices to make the spaces more appealing and promote indoor-outdoor workspaces.
It will be the first indoor-outdoor workplace in a high-rise campus setting in Orange County, according to Cook.
Underused outdoor patios on some of the buildings’ upper floors will get similar facelifts, along with renovations to the buildings’ lobbies, restrooms and elevators.
Mid-Rise Appeal
A similar project is under way at one of the largest mid-rise office complexes near John Wayne Airport, the four-building, 430,000-square-foot campus at the intersection of Main Street and Von Karman Avenue in Irvine that once served as the local hub of Washington Mutual Inc.
The largely vacant campus previously was known as Quintana but is being rebranded as Intersect by its new owners, a venture between Houston-based Hines Interests LP and Pacific Investment Management Co. in Newport Beach.
The campus sold last August for an estimated $121.5 million. The new owners plan to spend an additional $15 million over the next nine months in a capital improvement plan that includes upgrades to open spaces and common areas, in addition to a new conference room and a fitness center.
Much of the buildings’ interior space has been gutted with the goal of completing improvements to lobbies and restrooms by midyear, according to Hines Managing Director Ray Lawler, who leads the firm’s OC development and investment office.
Lawler said Intersect is better described as “generational workspace” instead of a creative-office redevelopment in the mold of Bixby’s recent projects, explaining that the offices will appeal to millennials, baby boomers and everyone in between.
The mid-rise buildings of Intersect, which top out at five stories, also appeal to those not looking for high-rise space in the airport area, Lawler said.
“We’re seeing a lot of tenants that want to be in a horizontal campus. They don’t want to carry a briefcase to work and take an elevator to the 12th floor. They want open space and (plenty of) surface parking.”
He said the new owners have completed one lease with an undisclosed tenant and have a couple of others nearing completion.
