Twin 9-Story Office Towers Planned for O.C.

By DARYL STRICKLAND

Jan. 5, 1999 12 AM PT

TIMES STAFF WRITER

In another sign of Orange County’s growing appetite for office space, a Newport Beach developer said Monday it plans to build a pair of nine-story office buildings in Santa Ana near John Wayne Airport for $80 million.

Although there are no tenants lined up, Nexus Development Co. said construction on the Twin Towers project, on six acres at MacArthur Boulevard and the Costa Mesa Freeway, will begin in April and should be completed in about a year.

Developers haven’t built office space for eight years in Orange County. But demand for commercial space has mushroomed in the county, particularly over the last year, prompting some of them to dust off plans for new structures.

In Orange County, vacancy rates have declined for 14 consecutive quarters. Moreover, the greater airport area, which contains more than half of Orange County’s office space, commands the county’s highest lease rates at $2.49 per square foot, according to Grubb & Ellis, a commercial real estate firm that tracks local markets.

“We saw this as a great opportunity to take advantage of a strong market,” said Nexus marketing director Jeffrey Bitetti.

The glass-and-granite towers, which will have underground parking, are part of a broader development planned for the site. Purchased in the late 1980s, the 65 acres of farmland were once envisioned as a hub of offices, shops and homes. One building--the 11-story 3 Imperial Promenade--went up in 1991, but then the market turned sour.

As the county’s economic outlook improved, however, there has been renewed interest in developing the remaining land.

First American Financial Services of Santa Ana bought 29 acres in April and is building a new corporate headquarters there. B.R.E. Investment Trust bought 13 acres and plans to break ground on 350 apartments within two months. And Mola Development is negotiating to build a hotel, health club and cinema at the site, Bitetti said.

Nexus bought six acres with First American from the seller, Chase Manhattan Bank, in April for an undisclosed price, he said. Nexus is still negotiating financing on the project, and Bitetti said he expects the company to have a financial partner by groundbreaking.

The site’s proximity to the airport and the high demand for office space make the towers “a viable project,” said Michael Dorsey, senior vice president of Grubb & Ellis.

It’s the first office construction project Nexus has undertaken since 1988. After building two mid-rise office buildings in Orange, the company focused on managing its portfolio of existing properties while riding out the downturn.

Now, it’s poised to jump back into the building business.

“There was pent-up demand for office space, and there was what we viewed as a great buy” in this area, said Bitetti, explaining why the company wanted to get back into developing commercial space.

But Nexus is not alone. As a result of the market’s resurgence, other developers have scrambled to get their projects underway in the surrounding area.

Two other office towers are under construction, one by Opus West, the other by Koll Real Estate Group. And several other projects are on the drawing board.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Growing Office Space

The Twin Towers have been proposed for the John Wayne Airport area. Over the past five years, vacancy rates in the airport area and in Orange County overall have declined, while lease rates per square foot have risen.

Average Lease Rates (Average price per square foot)

have gone up...

1993

OC Totals: $1.40

Class A: $1.55

1998

OC Totals: $1.95

Class A: $2.49

...and Vacancy Rates have gone down

1993

OC Totals: 17.2%

Class A: 15.2%