Spieker Plans 4 Major Office Towers in Orange
Spieker Properties Inc., one of Orange County’s largest commercial developers, is planning to build four major office buildings in Orange, including a 24-story tower that would become the county’s tallest building.
The development, which would cost as much as $250 million, would provide 1.2 million square feet of office space, underscoring a robust demand in one of the region’s tightest office markets. Indeed, developers have proposed a flurry of projects throughout the county as they scramble to meet demand.
Spieker, a Menlo Park-based real estate investment trust, has proposed the four buildings to border the Block at Orange, a major shopping and entertainment complex that has announced its own plans to expand.
In addition to the 24-story tower, the developer would put up three other structures ranging from six to 19 stories, adding to its substantial holdings in the area.
Early last year, the company paid $89.3 million for two office towers near the shopping center--21-story City Tower and the adjacent 19-story City Plaza.
Analysts said the area is ripe for major development because it offers lower rates than companies are paying for prime office space around John Wayne Airport and along the coast. Leasing rates for top-quality offices around the airport have climbed to $2.63 per square foot, among the highest in Southern California and 39% above the rates for offices of comparable quality in the central area, which includes Orange.
“As lease rates rise elsewhere in Orange County, I think we’ll see a lot of movement toward central Orange County,” said Craig Jones, Grubb & Ellis’ research director.
The Orange offices also are near major freeways linking Los Angeles and the Inland Empire, providing companies with an Orange County address while remaining within driving distance of neighboring counties.
As the county’s office vacancy rate hovers at a low 9.5%, Spieker is planning other buildings as well, mixing towers with mid- and low-rise offices.
“I think there’s strong demand for new office space, and with the low vacancies and continued absorption, there’s a need for new space,” said Louis Tomaselli, senior vice president, Voit Commercial Brokerage.
The development binge, by a company known for its conservative moves, reflects Spieker’s bullish outlook for the economy in Orange County as well as Southern California in general.
Spieker’s current buildings at the Block remain 98% occupied. One of the largest tenants, credit reporting giant Experian Inc., said it plans to moved its 1,500 employees to a complex in Costa Mesa by 2002.
Experian, which will be vacating a pair of 10-story buildings and two small structures, cited traffic and parking problems since the Block opened 13 months ago. But Spieker executives said they should have no trouble filling the space.
To fill the four new office buildings being planned, the company will draw from a variety of companies, such as insurers and telemarketers. Construction will not start on a new building until it becomes at least 35% preleased, said John Davenport, Spieker’s Southern California president.
Spieker’s ambitious development plans would bolster an area of the county that languished while other areas flourished. Three years ago, in fact, office vacancy rates still hovered around 20% and lease rates ranked among the lowest.
