Hot Spot for Offices? Think Brea
Orange County’s first new office buildings in several years aren’t going up in the posh high-rise havens of Irvine or Costa Mesa, but in the suburban city of Brea on Orange County’s northern border.
Newport Beach developer Olen Properties Corp. has erected the steel frames for two five-story office buildings in the city’s Lambert Road complex, and Olen’s chief executive isn’t worried that so far he has a tenant for only one of them.
Major real estate investors including Menlo Park-based Spieker Properties Inc. are also taking a big interest in this town of 35,000 people, snapping up the few office buildings that are available. In the last year, Spieker has acquired five large office properties, including sizable Brea Place, a 490,000-square-foot complex on State College Boulevard for which it forked over $61.4 million.
What’s Brea’s business appeal? Its location at the junction of Imperial Highway and the Orange Freeway, snug against Riverside, San Bernardino and Los Angeles counties, makes it a natural for labor-intensive “back office” uses.
Large insurance and finance firms favor Brea for administrative or customer service operations, primarily because they can draw from a large and diverse labor pool in the suburbs of three counties. American Funds Service Co., BankAmerica Corp. and CNA Insurance Co. all have large regional operations there.
Many executives commute from the coast or the foothill communities of Brea or Tustin Hills, said Spieker Senior Vice President John Davenport. Their employees often come over the hill from the Inland Empire or from Los Angeles County.
The Perrier Group, which owns Arrowhead and Calistoga bottled waters, decided to move its western regional operations to Brea from Monterey Park this December because its employee and customer bases were shifting south.
“The people we were recruiting were relocating into north Orange County, and that’s where our largest customers are,” said human resources director Howard Hulme, who lives in Yorba Linda.
The company leased a plain-Jane two-story building near Imperial Highway that will accommodate its 250 employees on a single 60,000-square-foot floor--triple the size of most office building floors. It will sublease the rest to another company. Hulme said having that much space in the building--at $1 per square foot per month--was worth the hassle of subleasing.
Indeed, rents have increased significantly since Perrier signed its lease in June. Landlords are now asking $1.34 per square foot per month, according to CB Commercial Real Estate Group Inc. And vacancy has dwindled to 10.18% in the third quarter--7.84% if you count as office space the large structure into which Bank of America just moved. That rate is well below many neighboring markets in central Orange County, including Orange and Anaheim.
The city has only 29 buildings larger than 30,000 square feet, most of them two- and three-story facilities built in the 1970s and early 1980s. The majority are west of the Orange Freeway on Lambert, Birch Street and State College Boulevard or off Imperial Highway. Brea didn’t suffer as much as other areas in the early 1990s’ recession. As companies downsized, many consolidated multiple branch offices into Brea, rather than moving out.
Now Olen Properties is beating the rest of the developers to the market, adding two more glass and granite buildings to the two-building complex.
“It was becoming quite clear to me that the market had turned the corner,” said Igor Olenicoff, Olen chief executive. “There was a shortage of available space and the businesses seemed to be emerging from the slump.”
The first building in the project was leased to Avery Dennison Corp. before bulldozers began rolling. The office products giant is moving more than 500 employees from other sites in Azusa, Ontario and its corporate headquarters in Pasadena to the 134,000-square-foot Brea building in March. A second building, which will be finished in June, is still without a tenant.
Both structures will cost Olenicoff $28.5 million to build. Costs were held down because he has owned the land since the late 1970s and he is financing the development with his company’s cash reserves.
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