Local owner-users have been taking advantage this year of the distressed office real estate market.
Four of the top five office sales in Orange County since the start of 2024 have been owner-user deals.
Owner-user activity is at an all-time high, Anthony DeLorenzo, vice chairman of CBRE Capital Markets, told the Business Journal. “In a ‘normal-ish’ market, about 10% of the buyer pool for the office sector comprises of owner-users,” DeLorenzo told the Business Journal. “Last year, we saw that about 33% of trades went to owner-users.”
Slow return to work has slashed office valuations across OC and the nation, which has allowed companies to claim local real estate at record low prices. In an otherwise less troubled office market, owner-users would be paying a premium for such buildings.
Expansion Plans
By contrast, the largest office deal this year to date was MicroVention Inc.’s acquisition of Pacific Life Insurance Co.’s nine-story office tower at 45 Enterprise in Aliso Viejo for $44 million.
The building’s latest price is about half of Pacific Life’s asking price of $80 million.
The deal for the 242,706-square-foot tower works out to about $181 per square foot. Prior to the pandemic, higher-end offices in OC traded for around $300 to $350 per square foot.
MicroVention, a maker of stroke treatments, has its current headquarters at the adjacent 35 Enterprise office building. The company aims to begin occupying the newly bought 45 Enterprise this fall.
Within the next five to 10 years, the company aims to use 45 Enterprise primarily for corporate operations—such as finance, marketing and legal—while 35 Enterprise will be a hub for the company’s manufacturing operations and R&D.
The move is an early step in MicroVention’s long-term growth plan in OC. Demand for its products, such as its catheters that treat strokes caused by blood clots, has been on the rise.
The company, which is owned by Japanese-based medical device maker Terumo Corp., counts over 100 job listings, a majority of which are based in Aliso Viejo. The firm’s local headcount currently totals more than 1,250 personnel.
MicroVention, which has been in growth mode since last year, added about one-fifth of its staff over the last 12 months.
HQ Move
The second largest office sale—another owner-user deal—since the start of the year was the $31 million trade of One MacArthur tower, a nine-story office building in Santa Ana’s South Coast Metro area.
The office’s most recent price marks a 43% dip from its sales price in 2019.
The seller, San Francisco-based alternative asset management firm TPG Angelo Gordon, parted with the 208,257-square-foot building for about $149 per square foot; the deal closed in February.
The building’s new owner is an LLC headed by Rick Arvielo, co-founder of Tustin-based mortgage lender New American Funding.
One MacArthur is the largest reported office buy in Orange County for Arvielo and his wife, Patty, who are New American’s co-CEOs. The couple also owns New American’s 44,000-square-foot headquarters facility and have bought and sold other properties in Tustin and Santa Ana in prior years.
New American Funding plans to occupy at least the seventh and eighth floors of the just-bought tower, Rick Arvielo told the Business Journal during an interview in February.
The building will be the company’s new headquarters and will house some 150 to 300 employees currently working at its properties on Myford Road in Tustin and Red Hill Avenue in Santa Ana.
Smaller Offices
The only investment deal in the top five office sales of 2024 was the sale of the Wells Fargo Building in Santa Ana for $18.6 million.
The buyer, Core Development Group, paid $154 per square foot for the 120,560-square-foot office; it was 48% leased at sale.
The remaining two of the top five office sales were both smaller owner-user deals, which both traded at a much higher per-square-foot basis than other OC offices.
The No. 4 office deal of this year was a $11.2 million acquisition by an LLC with ties to Newport Beach-based MLC Media Inc., a content creation and radio services firm that caters to the Hispanic market.
The deal for the building, a low-rise, 20,772-square-foot office along the San Diego (405) Freeway in Irvine, worked out to about $539 per square foot. The building gets around 100 million views annually on its busy stretch of the highway, according to brokerage Lee & Associates.
While the deal’s high per-square-foot price may seem like a pivotal moment for the struggling office sector, brokers said that’s far from the case.
“This is not a sign of office recovery,” Allen Basso of Lee & Associates told the Business Journal during an interview in February. “The buildings that are less improved and high-rise are still in trouble, but low-rise, high-quality buildings like this one are doing well.”
The fifth-priciest office sale so far this year was Camino Health Center’s purchase of a medical office in Lake Forest for $7.8 million.
Camino Health Center, a San Juan Capistrano-based healthcare system, had been a tenant at the 19,800-square-foot office, located at 22481 Aspan St., since 2016, according to real estate market data tracker CoStar Group Inc.
The seller, Providence Health & Services, parted with the building for nearly $394 per square foot.
