In what would be the largest office project built in Orange County in more than a decade, an Irvine developer announced plans Wednesday to erect three office towers across the street from John Wayne Airport at a cost of about $240 million.
The Colton Co. project, on 30 acres along MacArthur Boulevard, is another indication of Orange County’s booming economy. Demand for office space, especially near the airport, is at its highest level since the late 1980s.
“Our existing portfolio is 99% leased,” said David Colton, the company’s owner, whose 5-year-old firm owns 57 properties in Orange County worth about $300 million.
“We have no place to put people,” he said. “The consumption right now is significantly greater than the supply.”
Construction of the first 14-story tower, containing 350,000 square feet, is scheduled to begin by year’s end. Other structures still must be approved by the city of Irvine, hopefully by December, Colton said.
Although financing has yet to be arranged, Colton said he feels confident that the speculative project will gain funding because of the robust market.
Vacancy rates in the county have fallen for 10 consecutive quarters, according to CB Richard Ellis, a major commercial leasing firm. In the airport area, they have plunged to 6%, from 25% earlier this decade.
Rents have risen significantly during that time, to $2.55 a square foot, spurring more office projects that soon will be vying for the same clients. There are at least four other proposed office-tower projects within a mile of the Colton development.
“There hasn’t been an office building built in eight years in Orange County,” said Michael Dorsey, senior vice president of Grubb & Ellis. It’s taken the whole decade to absorb the amount of space already on the market, he said. But with the region’s booming economy, companies are looking to invest or expand.
About 2 million square feet of office space is being leased a year, up dramatically from as little as 500,000 square feet annually during the depths of the recession.
“There’s a shortage of office space now in our healthy economy and that’s spawned increasing demand for office space,” Dorsey said.
The site’s previous owner, McDonnell Douglas, planned to develop office buildings and a monorail that linked the project to the airport. But when Colton bought the land and existing office buildings for $20 million in 1996, he also acquired the development agreement that would have expired in 2001.
In addition to the three towers, which will surround a plaza, there will be two parking garages, three restaurants and other retail space in the project. No tenants have been announced.
Colton wants to nix the monorail, but he declined to say what would be offered instead.
The pair of four-story offices already on the property will not be razed until subsequent phases of the development are launched.
The first tower, to be built on vacant land, is expected to be completed in 2000. The second planned tower is 10 stories and 250,000 square feet; the third is 18 stories and 450,000 square feet.
The fate of two restaurants currently located on the site, Chanteclair and Hof’s Hut, isn’t clear, Colton said. They may survive depending upon the project’s final plan, which has yet to be completed.
He said negotiations already are underway with Chanteclair and Hof’s Hut, as well as other restaurants.
Heading up day-to-day management of the project is Robert Alleborn, who planned and developed some 200 acres around the airport decades ago.