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Monday, May 20, 2024

Irvine’s Spectrum Takes Lead in Spec Office Projects

The office market in Irvine around John Wayne Airport was the hub of speculative office development during the last building boom, with four office towers adding 55 floors and about 1.4 million square feet to Orange County’s largest base of high-end buildings between 2007 and 2009.

That’s not the case this time.

During the latest burst of construction, just one large-scale office project has broken ground in the vicinity without an anchor tenant signed up, Trammell Crow Co.’s two-building Boardwalk project on Jamboree Road.

That 537,000-square-foot development, whose glass-sheathed buildings are linked by a series of indoor and outdoor bridges, is slated to open in late summer.

A few large area firms have been rumored to be exploring leasing space at Boardwalk, though Dallas-based Trammell Crow hasn’t announced any deals.

A few other Orange County developers have told the Business Journal that concerns over leasing progress at Boardwalk have lessened their willingness to go ahead with their own area speculative office projects. Others point to multiple Irvine Co.-led buildings being built a few miles away in the Irvine Spectrum as a reason for caution.

The Spectrum area has become the primary source of speculative office development, thanks to Newport Beach-based Irvine Co.’s efforts there. Two office towers next to the developer’s Irvine Spectrum Center shopping center, and a pair of midrise buildings on Sand Canyon Boulevard have either opened in the past 18 months or are close to it, adding nearly a million square feet of space to the area.

Work on an additional four midrise buildings recently began at Irvine Co.’s Discovery Business Center campus, a project that will bring an additional 370,000 square feet of speculative space to the Spectrum’s office market next year (see story, page 1).

Irvine Co.’s aggressive development and its ability to offer lower rents if needed for offices it builds on its own land, have likely scared off other developers from spec office projects, multiple real estate and development sources tell the Business Journal.

Tustin Readies, Others Wait

While another speculative development in the airport area doesn’t appear likely in the near term, one notable project just over the city line in Tustin appears to be close to kicking off.

The first phase of Flight, a multibuilding creative-office project at the Tustin Legacy development, is scheduled to start this year. The 870,000-square-foot project is being headed by the Irvine office of Lincoln Property Co. Commercial and Boston-based real estate private equity firm Alcion Ventures.

There are plenty of airport-area projects being queued up for construction in Irvine if an occupant can be found first.

More than 1.3 million square feet of high-end office space have been proposed for Irvine sites in the market, which has about 24 million square feet of space and a nearly 10% vacancy rate.

The Spectrum office market, by comparison, has about 11 million square feet and a vacancy rate under 7%, local brokerage data shows.

The latest player around the airport is Irvine’s Great Far East Inc., which owns seven acres directly across the street from the facility near the intersection of MacArthur Boulevard and Campus Drive. It’s proposed a two-tower commercial development there called The Landmark.

The project would include a 19-story, 448,200-square-foot office on the property’s south side and a 15-story, 323,415-square-foot hotel with 386 rooms on the northern edge.

The hotel would be the first four-diamond quality one in the vicinity in nearly 20 years, according to Great Far East.

It plans to prelease nearly 40% of the office project before breaking ground on that portion, Great Far East Chief Executive Sean Cao said.

“We want to be careful,” he said. “We don’t know when the market is going to turn.” The project could open in about three years if all goes well, he said.

The developer must get airport-related approvals for the project, whose height has already drawn scrutiny due to its location near planes’ flight path, as well as city approvals.

“Height is always the issue” when it comes to projects in the area, Cao said.

Irvine’s planning commission is scheduled to consider the project this month.

Great Far East has been working on the project with Pei Cobb Freed & Partners, the New York-based architecture firm that’s designed several of Irvine Co.’s local office towers.

Design features of the 880,000-square-foot project include a second-level swimming pool at the U-shaped hotel, plus outdoor space for office tenants about five floors up.

Irvine-based LPA Inc. is associate architect, and Nabih Youssef Associates would serve as structural engineer, according to Pei Cobb’s website.

Several other projects are being considered in the same area, all of which appear to be waiting for a suitable tenant before starting work.

Irvine-based LBA Realty started to market space for lease this year at a six-story office it’s planning at the Park Place campus a few blocks from the airport.

The proposed 184,000-square-foot office at 3181 Michelson would sit alongside the San Diego (405) Freeway near the intersection of Jamboree Road and Michelson Drive.

It would be the first new office at Park Place since a 20-story tower at 3161 Michelson opened in 2007.

The Gensler-designed building would include floors spanning about 34,000 square feet on average, larger than a typical high-end office in the airport area.

It would also have a “signature 34,000-square-foot showroom space orientated toward I-405, providing a one-of-a-kind branding opportunity for future tenants,” per LBA’s marketing materials.

LBA is also considering developing a 10-building, 400,000-square-foot mixed-use campus on land it owns next to Park Place on the opposite corner of Jamboree Road and Michelson Drive, but it first needs to work through entitlement issues with the city.

The local office of Hines Interests has proposed a nine-story office about a mile from Park Place at 17850 Von Karman Ave. that would total 237,000 square feet.

Hines, which also runs the nearby Intersect office campus, doesn’t plan to break ground on the tower, which would be near the intersection of Von Karman Avenue and Main Street, without first signing tenants.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.

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