ConAgra Grocery Products said Monday that it has signed a lease for one of the largest vacant properties 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 last July to new quarters in Aliso Viejo.
ConAgra, an operating company owned by Nebraska-based ConAgra Inc., will occupy two-thirds of the space vacated by Fluor, the international engineering and construction firm. Fluor's change of address created the largest vacancy ever recorded in the county--600,000 square feet.
The deal is a major one, and it bodes well for the county's commercial market, brokers said. By nearly absorbing such a large vacancy in about four months, the local market will probably gain new favor among 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 space that faced stiff competition from other campus-style complexes. As much as 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.
But she will face another important hurdle next year when Airtouch Cellular is expected to move out of Park Place to its own campus, freeing up 190,000 square feet.
The Park Place complex 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 have been considered a strength as well as a drawback. The space appealed mainly to insurance carriers, health-care providers or other companies that use row upon row of cubicles in their offices.
As a result, the space was priced less than that of some other high-quality buildings in the John Wayne Airport area, which is one of the county's central business districts. The monthly rate at Park Place was going for $1.85 per square foot, including utilities and other fees.
But the region's economy has created strong demand for office space, and that has brought 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.
In the John Wayne Airport area, space absorption rate has slowed since January largely because of Fluor's move. The area has also seen a significant amount of new construction and new low-rise offices being created out of industrial space.
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.
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Real Estate Trends
Downtown Los Angeles Office Net Absorption (in millions of square feet)
Downtown Los Angeles Office Vacancy Rates
Note: Net absorption reflects the gain in rented space. Vacancy rate is the total vacant square footage divided by total rentable square footage in all existing buildings. Sublet space is space rented by primary tenants that is vacant and available for sublease.
Source: CoStar Group Inc.