Voit: Office Development Is Resurrected

IRVINE, CA-After the recession all but halted office construction, the sector is showing signs of life in Orange County. According to a report from Voit Real Estate Services, the recovery is being fueled by pent-up office demand, which continues to grow as the economy rebounds and the region adds jobs.

Build-to-suit projects were the first to recover, the report says. The Irvine Co. recently began work on a 380,000-square-foot tower in Newport Beach to be fully occupied by Pimco and has announced plans to construct its own headquarters in Newport Center that will consist of a 300,000-square-foot building expected to be completed in 2014. Also, as GlobeSt.com previously reported, Hyundai America Motor Inc. has begun work on a 500,000-square-foot building in Fountain Valley, and Blizzard Entertainment, Broadcom and Google are also reportedly considering build-to-suit options, according to Voit.

Speculative construction is also beginning to reemerge. Industry reports say that developer Michael Harrah has obtained financing and several tenant commitments to allow work on his 612,000-square-foot One Broadway Plaza in Santa Ana, set to break ground in mid-2013. The 37-story tower is expected to be the tallest building in Orange County upon completion. Also, many metro tenants are expanding staff, which could prompt more speculative construction starts over the next few years, according to Voit.

There's no big surprise as to why construction is on the rise at this point. Jerry Holdner, VP of market research for Voit, tells GlobeSt.com, “The simple rule of thumb is when vacancy drops below 12%, that's when the cranes come out in Orange County. The current vacancy rate in Orange County is 12.94%, and as we approach the 12% mark, we are beginning to hear about some developers talking about starting construction on office space in the county.”

According to the report, now that companies are eager to hire Orange County's workers, the demand for office space is even greater. The tech, biotech, automotive and mortgage lending sectors have all added employees, while layoffs have been much more constrained. Several local tenants took more space in 2012, including Allergan, CoreLogic, Western Digital, LA Fitness, Greenlight Financial, Gateway One and Panasonic Aviation, and firms including Goodrich Corp. and First PacTrust Bancorp shifted operations from other Southern California metros into Orange County last year.