Huge O.C. Complex Proposed
Underscoring the robust demand for office space in Orange County, a four-building office complex is being proposed near the Block at Orange that would include a 24-story tower--potentially the county’s tallest building.
Spieker Properties Inc., one of Orange County’s largest commercial developers, is proposing the development, which would cost as much as $250 million and change the city’s skyline in an area that is fast becoming one of the region’s largest commercial hubs.
“That would be the central county equivalent of Newport Center,” said Steve Ehrich, a director at Charles Dunn Co. in Irvine, referring to the office buildings in Newport Beach that ring one of the county’s largest shopping centers, Fashion Island. “I think that’s what they’re trying to achieve.”
The complex, which still must be approved by city officials, a process that could take up to six months, would consist of 1.2 million square feet of office space. When added to the six buildings that Spieker already owns in the area, the complex would help elevate the area as one of Southern California’s key business, sports and shopping districts.
In addition to the 24-story tower, Spieker would put up three other office buildings ranging from six to 19 stories. Company officials said they plan to erect the buildings one at a time, and that the sizes of the buildings and the scope of the project could be altered by the government-approval process, the economy, or both. The entire project could take years to build, especially if the county’s red-hot economy cools.
But Spieker executives said demand for top-drawer office space is showing no signs of cooling.
“We’ve experienced strong demand for this product,” said Spieker Vice President Mark Valentine.
To fill the four new office buildings that are planned, Spieker will target a variety of companies including insurers and telemarketers. Construction will not start on the first building until Spieker leases 35% of the space, said John Davenport, the company’s Southern California president.
*
The ambitious development plan would bolster an area of the county that has languished while others have flourished. Three years ago, office vacancy rates in central county hovered around 20% and lease rates ranked among the lowest.
But a spate of major development--a widening of Interstate 5, a new theme park next to Disneyland, an expanded Anaheim Convention Center, the new Sportstown entertainment complex at Edison International Field--is expected to boost the area’s profile.
Real estate experts said the west Orange area is ripe for major development because it offers lower lease rates than what companies are paying for similar 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, the highest in Southern California and 39% above the rates for offices of comparable quality in the central county, including 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.
*
Spieker is a Menlo Park, Calif.-based real estate investment trust that in recent years has become one of the biggest players in Orange County’s booming commercial real estate market. Last year, the company paid $89.3 million for two office towers near the Block--the 21-story City Tower and the 19-story City Plaza.
Spieker owns and operates more than 42 million square feet of commercial real estate in California and the Pacific Northwest. About 10% of its portfolio is in Orange County.
As the county’s office vacancy rate hovers at 9.5%, near a historical low, Spieker is planning to construct other buildings as well, mixing towers with mid- and low-rise offices.
The company has started looking for tenants for Stadium Towers Plaza, a 12-story structure being planned near Edison International Field in Anaheim. Other projects are being planned for Irvine, Mission Viejo and Brea.
“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 at 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.
And for good reason. The company bought an empty eight-story office building on Chapman Avenue in 1996. It’s now 100% occupied. City Plaza, also purchased in 1998, was only one-third full, but today is full.
One of Spieker’s largest tenants, credit reporting giant Experian Inc., said earlier this month that it plans to move 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 smaller 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. Valentine said the company has received several inquires about the Experian space, even though Spieker has not begun soliciting potential tenants.
*
OC2000
Technology, tourism, real estate and water sports anchor O.C.’s $100-billion economy. B1
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Spieker Proposals
Spieker Properties has submitted plans to the city of Orange for four new office developments near the Block at Orange shopping center. A look at the proposals and the developers major existing properties:Spieker’s 5 Biggest OC Office Buildings
Griffin Towers 540,000 Hutton Centre Drive Santa Ana
City Tower 407,674 City Boulevard West Orange
City Plaza 318,622 City Boulevard West Orange
2600 Michelson Dr. 306,017 Michelson Drive Irvine
Stadium Towers Plaza 253,569 Katella Avenue Anaheim
