Ground-Up Office to Start in Late '15

ORANGE COUNTY, CA—Several commercial office buildings are expected to break ground in the Irvine area late this year as users seek 'lifestyle office' space, the new moniker for creative office, experts tell GlobeSt.com exclusively. We spoke with office-sector executives in-the-know on what to expect with office construction in Orange County as the year progresses.

“Most new ground-up office space has and is being built by the Irvine Co. in Fashion Island and in the Irvine Spectrum,” Jason Rich, VP of operations for builder Snyder Langston, tells GlobeSt.com. “Several clients will start construction late this year on new ground-up commercial-office buildings in the Irvine area. We also just finished the Hyundai Motor America headquarters in Fountain Valley, which is a 500,000-square-foot LEED-Gold-certified building that is now occupied by about 1,100 employees.

Rich adds that HMA had been operating in a 220,000-square-foot building on an 18-acre site located along the 405 freeway in Fountain Valley since January 1990. The firm needed more space, so a new building was developed on its existing site, replacing its old building.

In addition to creative-office properties, medical-office and healthcare facilities will continue to crop up in Orange County in response to healthcare reform and shifting needs in this business sector. Snyder Langston recently completed construction on a $37-million, three-story, 70,000-square-foot multi-tenant office building and a six-level parking structure at 3751 Katella Ave. within Los Alamitos Medical Center. Developer Pacific Medical Buildings began construction of the MOB with only 43% of the property pre-leased and negotiated a physician-ownership model and lease terms with the opportunity to invest 100% of the equity in the new building. According to Mark Toothacre, president of PMB, “The project was delivered on-budget and on-schedule in 14 months. We ultimately developed a very high-quality, LEED-certified building that will provide a great patient experience.”

While there were no new strictly office deliveries in the county for the fourth quarter, the region did see five new investment-grade office buildings come online for the year, Dan Vittone, principal, capital markets group, for Avison Young, tells GlobeSt.com. The buildings totaled 1,442,761 square feet, more than 340,000 square feet of which was speculative space.

“There are currently four investment-grade office properties under construction, amounting to a total of 563,906 square feet of new inventory that will soon be added to the market,” says Vittone. “The largest of these, at 425,044 square feet, located in Irvine, has no tenant pre-commitments and will be completed in 2016. The remaining buildings will complete in 2015 and still have available space. There is currently more than 4 million square feet of proposed office space poised on the sidelines and actively being marketed.”

As for the types of properties being built in the market, Rich says the Irvine Co. has built two, 20-story, 400,000-square-foot, class-A office buildings in Fashion Island over the past couple of years—one for PIMCO and the other just recently finished. The firm also started another 20-story tower at the Irvine Spectrum in August 2014, and it is being built on spec.

“There are a lot of existing smaller industrial/office buildings being renovated into a more modern style inside and out,” says Rich. “These are largely concentrated in Irvine, Costa Mesa and Santa Ana. For example, Bixby Land Co. is renovating a 79,756-square-foot office property in Tustin near Santa Ana. The goal is to transform the building into a contemporary workspace.”

Vittone listed the four investment-grade properties being built in the county as 200 Spectrum Center, Irvine, a 425,044-square-foot property being developed by the Irvine Co, set for completion in Q1 2016; 6940 Beach Blvd., Buena Park, a 75,000-square-foot property being developed by M + D Properties, set for completion Q4 2015; Rancho Viejo Rd., San Juan Capistrano, a 42,551-square-foot property being developed by Project Dimensions, set for completion this quarter; and 4450 MacArthur Blvd., Newport Beach, a 21,311-square-foot property being developed by Mark IV Capital Inc., also due for completion this quarter.

“Class-A landlords are seeing users for larger blocks of space,” says Vittone. “These users tend to maximize floor plates (i.e., keep the load factor down) and tend to have longer-term leases, both of which are significant drivers of value on the back end.” Rich says technology companies seem to be the biggest tenant type for office space in this market.

Certain design elements have been deemed necessary for new office construction. Vittone says Title 24 will come into play on all new construction, “but the focus of providing a 'lifestyle office' (new moniker for creative office) is becoming ever more sough- out by tenants in the marketplace.”

Rich says the necessary elements for newly constructed offices include open floor plans, natural lighting, interior and exterior community space and Wi-Fi access. He cites the Hyundai building as an ideal case study for what corporate users want today in an office.

“As part of the design and planning process for HMA's new headquarters, Gensler developed a comprehensive workplace strategy for how Hyundai's future workplace could best support its business goals, culture and brand,” says Rich. “The six-story steel-framed glass- and aluminum-clad Hyundai building includes an open-air courtyard, a one-story technical-services wing and a full-service kitchen and cafeteria, along with a 1,535-stall free-standing four-story parking structure. The new building features translucent-glass office floors floating over a precast concrete base. This maximizes light and views.”

In addition to the glass-panel exterior, another key focal point of the Hyundai building is a two-story-high entrance passageway, which leads to an open-to-the-sky public courtyard in the building's center. “The 405 freeway was also incorporated into the design,” says Rich. “The clear glass walls of the main lobby on the south side of the courtyard afford a perfectly framed image of cars flashing silently in and out of view.”

The interior space design was also a departure from Hyundai's previous office work environment, Rich says. “Gensler designed a performance-based work environment using large floor plates with a great deal of adjacency and connectivity between multiple departments to encourage collaboration and connectivity. The new building has 230 private offices and 1,375 work stations with accessible daylight and outside views. Each floor has four open collaborative lounges on each corner.”