Orange County’s technology industry is doing its part to add some spice to the area’s office market.
Mortgage lenders, financial services companies, education-related firms and healthcare companies have all at one time or another given a boost to the area’s office market.
So far in 2011, technology is leading the way.
A large chunk of the area’s largest office expansions and relocations so far this year has been technology tenants, including moves by area chipmakers, software developers, gaming companies and others.
Prominent technology companies inking new leases of late include:
n Microsemi Corp., which is moving to a 109,000-square-foot office in Aliso Viejo that’s nearly four times the size of the chipmaker’s headquarters in Irvine.
• Experian PLC, which moved a consumer information division from the Irvine Towers office complex to 87,000 square feet in a building closer to its North American headquarters in Costa Mesa.
• Epicor Software Corp., another Irvine Towers tenant, recently moved across the street to Lakeshore Towers at 18101 Von Karman Ave., where it took a 68,000-square-foot lease.
• Aliso Viejo-based Telogis Inc., a maker of navigation and traffic software for delivery fleets, recently moved to larger offices at the Summit Office Campus, in a 26,000-square-foot deal.
Those deals come on the heels of disk maker Western Digital Corp. relocating operations from Lake Forest and Aliso Viejo to a new headquarters at the Park Place office campus in Irvine.
The Western Digital move, totaling about 365,000 square feet of space, is OC’s largest corporate relocation in several years. It’s still in process, according to the company.
In addition to the recently signed leases, many of the largest prospects for new—and perhaps larger—office space also are technology firms. The list is made up of several prominent names in the local industry, including Blizzard Entertainment Inc. in Irvine, Mountain View-based Google Inc., CoreLogic Inc. in Santa Ana, and Irvine-based Toshiba America Inc., the U.S. arm of parent Toshiba Corp. in Tokyo, according to brokers with the Irvine office of Jones Lang LaSalle.
Those four companies currently lease a combined total of about half a million square feet of space. All are believed to be looking to expand.
While noteworthy, the recent moves among tech companies aren’t likely to put too much of a dent in the vacancy rates for OC’s office market.
The vacancy rate now runs from 16% to 18%, according to different commercial brokerage’s internal data. It’s not considered a favorable market for landlords until vacancy rates get closer to 10%.
While “the market is quite fluid, with a lot of relocations and more companies being aggressive in their space-use decisions, it still lacks demand that is sufficient to really start making a dent in excess supply,” said a recent market report from the Irvine office of tenant brokerage Studley Inc.
Overall leasing in OC’s office market totaled about 1.8 million square feet in the second quarter, which was down nearly 40% from the prior quarter, according to Studley’s data.
Big Blocks Tighten
On the upside for area landlords, the number of large, contiguous blocks of office space totaling 100,000 square feet or more fell to 21 from 22 last quarter, the brokerage reported.
Larger tenants “are likely to see availability tighten,” Studley reported.
Among multifloor deals expected to come back to the market soon, the most prominent might be at Irvine Company’s 40 Pacifica building in the Spectrum.
The Federal Deposit Insurance Corp. is planning to shutter its offices at 40 Pacifica early next year in what it says is a reflection of improving health of the banking industry.
The FDIC opened the temporary West Coast satellite office in early 2009, signing a 200,000-square-foot lease with Newport Beach-based Irvine Co. for the recently completed building.
Irvine Co.’s website lists about 250,000 square feet of office space at 40 Pacific available to show as of next March.
The lack of bigger chunks of office space has at least one area technology company eyeing a potential ground-up development.
In June, the Business Journal reported that Blizzard was considering building a new headquarters complex.
Estimates for the size of the rumored complex run from 700,000 square feet to 1 million square feet.
The company’s current campus, plus two nearby offices it leases, total about 335,000 square feet.
Blizzard, which brought in nearly $1.7 billion in revenue in the past year, has nearly tripled the amount of space it leases here in the past four years.
