It’s taken a few years longer than expected, but Bob Olson finally has a hotel project moving ahead in Tustin—the latest sign of activity for Orange County’s long-dormant commercial real estate development industry.
Olson, chief executive of Irvine-based R.D. Olson Development, broke ground this month on Tustin Pacific Center, a hotel and retail project just off the Costa Mesa (55) Freeway, along Edinger Avenue.
The estimated $60 million project will count a pair of four-story hotels; a 149-room Residence Inn by Marriott; and a 145-room Fairfield Inn & Suites by Marriott, along with 16,180 square feet of restaurants and shops.
All told the 7.5-acre project will run about 196,000 square feet. Tustin Pacific Center will be the first hotels to be built in Tustin in more than 15 years, according to Olson, who anticipates a summer 2013 opening for the project.
Had the economy—and the local market for commercial development—not gone south a few years ago, Tustin Pacific Center would have been the city’s second major hotel project to break ground in about three years.
Olson was originally tapped to build a trio of hotels at the city’s massive Tustin Legacy project, as part of the 820-acre redevelopment of part of the city’s former Marine base. But after Tustin Legacy’s initial master developer, Aliso Viejo-based Shea Properties, postponed and then withdrew from the project in 2010, hotel and other large-scale plans for the project were scrapped.
Tustin wasn’t alone in seeing development work grind to a halt amid the last recession.
Less than 1 million square feet of new commercial buildings completed work in OC in each of the past three years, not counting apartment complexes or government buildings, according to Business Journal data.
Nearly that much development has broken ground this August, thanks to a handful of big projects, including Tustin Pacific Center. With other projects also on the horizon, it’s a welcome sign of life moving ahead after the last downturn, for developers and cities alike.
Tustin, since parting ways with Shea, has reworked plans for its former Marine base, breaking up land into smaller parcels appealing to a variety of uses.
The city has entered exclusive negotiations with Jacksonville, Fla.-based Regency Centers Corp. for about 185,000 square feet of retail and medical office space. It has done the same with Newport Beach-based Irvine Company for several hundred apartments, and Irvine-based Standard Pacific Corp. for about 240 homes, all in the past two months.
Those projects are likely to start seeing work move ahead next year, adding to a local development pipeline that is starting to see a lot more events featuring ceremonial groundbreaking shovels, hard hats, and photo opportunities featuring mayors, developers and others.
Along with Tustin Pacific Center, groundbreaking events were held this month in Costa Mesa for Azulón at Mesa Verde, a 215-unit apartment complex for adults who are 55 and older. The four-story complex is being built on an unused 7.6-acre portion of a 21-acre commercial site near the intersection of Harbor Boulevard and Mesa Verde Drive, a few blocks from Orange Coast College.
M.V. Partners of Costa Mesa is building the project—one of two high-profile retirement communities now going up in the city, along with Santa Ana-based Nexus Cos.’ 185-unit Vivante on the Coast.
The Vivante project is going up about a mile from Hoag Hospital in Newport Beach at an estimated cost of $62 million.
Plans call for the Azulón development, which is being built on land owned by C.J. Segerstrom & Sons, to be completed by the end of next year.
The Source
Also seeing a ceremonial groundbreaking event this month is Buena Park’s The Source, a proposed 500,000-square-foot mixed-use project located about a mile from Knott’s Berry Farm (see story, page 1).
The Source, being developed by Lynwood-based M+D Properties, is expected to hold retail and office space, along with a hotel and entertainment center for concerts, performances, conferences and other events.
The Source is slated for completion in fall 2014. The project has been in the works for several years, but any delays the Buena Park project has seen pale in comparison to Huntington Beach’s Pacific City mixed-use development—which also is now seeing talk of construction soon moving ahead.
Pacific City, a 31-acre mixed-use project located south of the Huntington Beach Pier along Pacific Coast Highway, calls for 516 apartments, 191,000 square feet of shops, restaurants and offices, and an eight-story, 250-room hotel, along with a small park.
Plans for Pacific City—which last year got a new owner, Miami-based Crescent Heights—have been in the works for close to a decade. The city of Huntington Beach signed off on the project in 2004.
San Jose-based DJM Capital Partners Inc. confirmed this month that it was under contract to buy land from Crescent Heights that would hold the commercial and hotel portions of Pacific City development. Construction on its part of the project could start next year, the DJM President Lindsay Parton said earlier this month.
Amid the recent plans for new hotels, retail development, and office construction by Irvine Co. in Newport Beach (see story, page 1), the one area of OC’s commercial real estate world notably lacking in ground-breaking events of late appears to be the industrial sector.
That market appears to be a prime candidate for new construction, with vacancy levels of less than 5% for the region’s industrial buildings.
Right now the largest industrial project on the books remains Panattoni Development Co.’s long-awaited Anaheim Concourse project, which could total close to 900,000 square feet of space in the Anaheim Canyon business corridor along the Riverside (91) Freeway.
An exact time frame for Panattoni’s groundbreaking is up in the air. Most industrial watchers expect the first buildings at the Sacramento-based company’s massive project to start work later this year, barring any complications.
Looking Ahead
More projects in OC could be on the way, according to market watchers.
All told, Southern California has about 10 million square feet of true speculative industrial development moving ahead right now, said Kurt Strasmann, senior managing director for the OC operations of CBRE Group Inc.
Most of that work is being done in the Inland Empire, where there’s close to a dozen industrial projects larger than 500,000 square feet now moving ahead on a speculative basis, said Strasmann, who spoke earlier this month on a panel at the RealShare Orange County conference in Irvine.
Buildings in the 500,000-square-foot range might not make sense in Orange County, but the area is due for some new, larger construction, said Brandon Birtcher, who heads up the Irvine office of development company Goodman Birtcher North America.
Birtcher built OC’s last sizable industrial project, a 375,000-square-foot headquarters and distribution building for Northgate Gonzalez Market that opened in 2010.
Only about 50 of the nearly 10,000 industrial buildings in OC top 300,000 square feet in size, Birtcher said.
There will be increased need for local distribution centers in the 250,000-square-foot range in OC, as online sales and better customer service push retailers and other businesses to adapt to a same-day delivery model, rather than next-day, he said.
