ConAgra Grocery Bags Big Lease at Park Place

Reflecting high demand for Orange County office space, ConAgra Grocery Products said Monday it has signed a lease for one of the largest areas in the county in recent years, renting 400,000 square feet in an Irvine office complex.

Terms of the deal between Park Place Office Campus and ConAgra Grocery, formerly known as Hunt-Wesson Inc., were not disclosed.

ConAgra Grocery will move its 800 employees from a five-building, 13-acre complex in Fullerton next summer to the long, low-rise former headquarters of Fluor Corp., which moved in July to Aliso Viejo.

ConAgra will occupy two-thirds of the space vacated by Fluor, an international engineering and construction firm. Fluor’s change of address created the largest vacancy ever recorded in the county--600,000 square feet.

The landmark deal bodes well for the county’s surging commercial market, brokers said. By nearly absorbing such a large void in roughly four months, the local market will likely gain favor with investors.

“If other developers have been on the fence about new construction, this is the kind of thing that will push them forward,” said Barry Gail, a principal at Cushman & Wakefield of California Inc.

For the owner and property manager of Park Place, which announced several smaller deals in October that filled 97,000 square feet of the office complex, the agreement is a significant victory for renting a unique space that faced stiff competition from other campus-style complexes.

From 75,000 square feet to 100,000 square feet of the old Fluor space remains to be rented.

“I think it’s indicative of the strong market we have,” said Janine Padia, who heads leasing for Winthrop Management. She said she has half a dozen companies that have shown interest in the remaining space. “There’s still a lot of activity.”

But she will face another important hurdle next year when Airtouch Cellular is expected to move out of Park Place to its own campus next year, freeing up 190,000 square feet.

Park Place contains six four-story buildings, a 10-story tower and single-story offices with a concourse that connects the structures. In the low-rise buildings, each floor is almost an acre wide, nearly as large as a football field.

Floor sizes were considered a strength, as well as a drawback, since the space could accommodate only insurance carriers, health-care providers or other companies that required layers of cubicles.

As a result, the space was priced less than some other high-quality buildings in the John Wayne Airport area, a central business district in the county. The monthly rate at Park Place was $1.85 per square foot, including utilities and other fees.

But the region’s economy has created strong demand for office space and, as a result, a spate of new construction. There are 2.7 million square feet of office space being built in the county, the highest amount in a decade, according to third-quarter figures from commercial brokerage Grubb & Ellis Inc.

Fluor’s move and new low-rise offices created out of industrial space in the John Wayne Airport area made it tougher to fill vacancies quickly.

Still, Orange County’s vacancy rate remains near a record low. In the third-quarter, the rate rose to 9.1% from its all-time low of 8.6% a year ago, Grubb & Ellis said.

Now that Park Place is almost filled, other high-quality buildings in the area and in nearby Newport Beach, where space at $4 per square foot is among the highest priced in the state, are more likely to attract their asking rates, some brokers say.

“It’s the strongest market I’ve ever seen,” said Douglas Killian, a 14-year veteran who is senior vice president at Voit Commercial Brokerage in Irvine.

In the scramble for space, companies like Experian, Citicorp and software maker New Horizons are seeking new leases for large quarters, 100,000 square feet or more, brokers said.

In addition, at least half a dozen companies have been searching for offices of 20,000 to 70,000 square feet, brokers said. Generally, a large lease in Orange County is one for more than 50,000 square feet.

“I think you can say all cylinders of our economy are running, and the extent of that confidence in the Orange County business community is exceptional to say the least,” said Brad Rawlins, senior vice president at commercial brokerage Lee & Associates in Irvine. “I think things will continue because I don’t see any slowdown in the immediate future.”

ConAgra, which makes and markets well-known brand names such as Hunt’s tomato sauce, Orville Redenbacher popcorn, Rosarita Mexican Foods, Swiss Miss hot chocolate and Peter Pan Peanut Butter, was persuaded to move because of Park Place’s open floor plan--all in adjacent structures.

“We wanted to bring our employees under one roof,” said company spokeswoman Kay Carpenter.

ConAgra, an independent operating company owned by Nebraska-based ConAgra Inc., owns the Fullerton site it is vacating. It will put that property up for sale immediately, she said.