BREA, CA-The office market in Orange County is tightening to the point where not only class-A space is hard to find, but class-B vacancy is also plummeting in some areas. Scott Meserve, EVP of the Koll Co., tells GlobeSt.com that in Brea, class-B vacancy rates should be entering the single digits shortly.
As GlobeSt.com reported earlier this week, theKoll Co. has signed the IMS Co., which was recently acquired by Zodiac Aerospace of France, to what is being hailed as the largest office-lease deal in Orange County so far this quarter. IMS has taken 81,077 square feet of space at 2929 Imperial here, bringing the two-story, 121,153-square-foot office park to full occupancy; the long-term lease is valued in excess of $11 million.
“Statistically, and if you also just ask people, everyone says the office market is getting better,” says Meserve. “Class-B space is starting to fill up, particularly if you're in a location that attracts corporate America.”
Meserve says his firm targeted 2929 Imperial because the Brea market is largely made up of back-office, class-B users, particularly banks and insurance companies. “It worked very well for us. The tenant originally came from our own building that was sold and recapitalized, and they expanded rather rapidly.”
Meserve points out that in the northern part of Orange County, class-B space is faring better than class-A space due to the ownership nature of these sectors. However, he is hesitant to say that the tight vacancies may spur office development. “I don't know. There are land constraints in Brea, where land is targeted toward industrial or multifamily. The rates are still not there. While vacancy has gone down, the rates aren't up yet.”
Jeff Ingham, senior managing director of Jones Lang LaSalle, agrees, saying that recovery has not hit the speculative development stage yet. “With vacancy rates hovering in the mid-teens across Orange County, speculative development is still an afterthought for most area developers,” he tells GlobeSt.com. “Build-to-suits and the Irvine Co., the area's largest landlord, are the only players truly active with office-development projects.”
As Ingham recently told GlobeSt.com, the largest build-to-suit projects for companies that are the most notably cutting edge in their industry include PIMCO, Hyundai and Google. “Currently, there are only two submarkets that are anticipated to see near-term speculative development: Irvine Spectrum, where there are single-digit vacancies in the high-rise market, and Fashion Island, the submarket achieving the highest office rents given its ocean views, proximity to executive housing and abundance of amenities. Both submarkets are controlled by the Irvine Co., providing for a very low land basis for the developer with limited competition.”
Within Irvine Spectrum, it is rumored that the Irvine Co. is toying with the idea of constructing another class-A tower given the mixed-use area's recent success, Ingham adds. “The tower is anticipated to be similar to the prominent 20 and 40 Pacifica buildings located at Irvine Center Dr. and the 405 freeway.”
Within Fashion Island, the Irvine Co. has broken ground on a 20-story high-rise adjacent to its headquarters, says Ingham. The project is expected to be completed in fourth-quarter 2014, and the Irvine Co. has not officially marketed the building, nor have they created marketing materials, as it is anticipated that they make a portion of the building for their own use.
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
