Southland’s Pace of Development Running on High

Construction cranes and scaffolding have sprouted across Southern California, particularly in Orange County, as a plethora of major commercial real estate projects break ground or head for completion.

The region’s buoyant economy, low vacancy rates and a dearth of building in previous years have shifted construction activity into high gear across the region. More developers are scrambling to get financing and government approval to take advantage of the market. Local real estate developers have not been this busy since the real estate boom of the late 1980s.

An estimated 7.8 million square feet of office space were under construction during the third quarter of last year in Orange and Los Angeles counties, according to the research firm Delta Associates in Alexandria, Va. Construction crews are particularly busy in Orange County, where 2.1 million square feet of office space--or 4% of the existing space--are under development.

The projects range from twin nine-story towers near John Wayne Airport to several low-rise buildings in Irvine, Lake Forest and Aliso Viejo, among others.

All that activity has raised concerns about overbuilding in some markets, which could boost vacancy rates and push down rents. However, most real estate observers say that the region as a whole will be able to absorb most of the new space without much problem. In Orange County, for example, the office vacancy rate is expected to be 9.5%, near the all-time low.

Here’s is an update on some major projects that are under construction or in planning in Orange County and elsewhere in the region:

Irvine

One of Orange County’s largest commercial projects involves the construction of a new regional headquarters campus for AirTouch Cellular. Lowe Enterprises of Los Angeles is developing the 450,000-square-foot headquarters, which features a cluster of low-rise buildings in the Irvine Spectrum.

The complex is scheduled to be completed in the second half of this year, when nearly 2,000 employees will be relocated to the facility from throughout the area. AirTouch will lease the space from Lowe Enterprises.

The Irvine Technology Center will offer more than 1.5 million square feet of office and industrial space when it is completed in several years. The Irvine Co., which is developing the project, recently completed six buildings, the first phase. The largest tenant announced so far is Nextel Communications, which is taking 116,000 square feet, the equivalent of two low-rise buildings in the project, Irvine Co. spokesman Paul Kranhold said.

Irvine Co.’s University Research Park, a 185-acre project that houses high-technology firms working jointly on research projects with UC Irvine, is almost at the halfway point. Eight buildings are under construction and 22 more are scheduled to be built for the project, which will have more than 2.5 million square feet of space.

John Wayne Airport Area

Nexus Development Co. plans to break ground on twin nine-story office buildings near John Wayne Airport early this year. The Newport Beach company had planned to start work on the 400,000-square-foot project last spring but ran into “unforeseen challenges in the financing,” said Jeff Bitetti, director of marketing.

The Twin Towers at MacArthur Place, as the project is known, has signed a lease with MSC Software for 125,000 square feet of space.

Koll Development Co. is expected to begin construction by March on the $40-million, eight-story second phase of 1901 Main Street, which is scheduled to be completed early next year. The first phase, completed late last year, is more than 90% occupied, said Nadir Shah, Koll’s vice president.

The Newport Beach-based commercial developer is launching Koll Center South by June. The $50-million office campus project, two mid-rise buildings with a total of 250,000 square feet, is expected to take a year to complete. Although no tenants have been announced, discussions are underway, Shah said.

Lakeshore Towers, a $50-million, 10-story building under construction in the airport area, is scheduled to open next summer. Ernst & Young, one of the nation’s largest accounting firms, and E&Y; Kenneth Leventhal Real Estate Group, a Newport Beach-based subsidiary specializing in real estate, have agreed to combine their Orange County offices, leasing four floors in the building. An earlier phase of Lakeshore Towers, built across the street, is one of Orange County’s largest buildings at 18 stories.

Lake Forest

The Trammell Crow Co. broke ground last month on Pacific Vista, a 320,000-square-foot office campus in Lake Forest. The $55-million project will have five two-story buildings, making it one of the largest projects of its kind in Orange County. It’s also the first project that Trammell Crow has built in 15 years without a commitment in advance from a major tenant, said John Harty, a company vice president.

Orange

Spieker Properties Inc. has proposed a four-building office complex around the Block at Orange that would include a 24-story tower, potentially the county’s tallest building. The development, which could cost $250 million, would rank among the largest of its kind in Orange County and change the city’s skyline.

The company has proposed putting up three buildings ranging from six to 19 stories, containing 1.2 million square feet overall. Combined with the other six buildings the company owns at that location, Spieker would have 2.5 million square feet overall surrounding the huge shopping and entertainment complex.

Anaheim

Polygon Development is expected to break ground next month on the first phase of Canyon Business Centre-Anaheim, the city’s first office/industrial project. The park, which will be built on 15 acres of vacant land, consists of 18 single and two-story buildings. The developer has not announced any tenants.

Polygon also anticipates breaking ground by March on the first phase of Arena Corporate Centre, an office project next to the Arrowhead Pond of Anaheim. The development, consisting of four mid-rise buildings, could eventually include 810,000 square feet.

Costa Mesa

Experian Inc. plans to build a campus-style headquarters that could cost as much as $100 million on vacant property about a mile east of South Coast Plaza. The new 475,000-square-foot complex, on Anton Street near the junction of the San Diego and Costa Mesa freeways, will have four buildings, none more than five stories. The buildings are expected to be completed by 2002.

Burbank

Regent Properties of Beverly Hills-based has signed a develop-ment deal with the city for a sprawling office, hotel and retail project at San Fernando Road and Olive Avenue near the Media City Center mall. The $100-million project, called Burbank Plaza, will include an eight-story office building, a 300-room Marriott hotel and retail space.

The project is scheduled to break ground in mid 2000.

Carson

Three buildings totaling 450,000 square feet are scheduled for completion later this month at Dominguez Technology Park, rising on a former oil field near Cal State Dominguez Hills. The park, one of the largest industrial projects under development in Los Angeles County, is designed to appeal to a mix of light industrial and office users.

Watson Land Co., which is developing the 150-acre project, said it has already leased one building, to an e-commerce company it declined to name.

Downtown Los Angeles

Developer Tom Gilmore is in the final stages of securing $32 million in financing to transform three buildings off Skid Row into loft-style apartments and stores.

Gilmore said the first of the 250 apartments--to be spread over three historic buildings along 4th Street--will be ready by June. About 65% of the retail space has been leased to a variety of tenants, including the owners of C Bar--a popular Beverly Hills caviar bar--and Hollywood Hills Coffee Shop.

On the western fringe of downtown Los Angeles, the 636-unit Medici apartment building is being built atop a large parking garage. The first phase of the $100-million complex--the largest now under construction in Los Angeles County--is scheduled to be completed later this year. The project is by G.H. Palmer & Associates of Los Angeles. It will also include ground-floor retail space and a private one-acre park for residents.

Fairfax District

Demolition crews will begin work later this month to make way for construction of a 650,000-square-foot retail and entertainment complex next to the historic Farmers Market.

Developer Rick Caruso of Santa Monica said that about 70% of The Grove at Farmers Market has been leased to retailers, including the Nordstrom department store chain. The $100-million open-air mall will wrap around the eastern and northern edges of the original Farmers Market. It is scheduled to open in August 2001.

Hollywood

A mammoth crater in the center of Hollywood marks the site for the $385-million Hollywood & Highland project. The crater will eventually be filled with the foundation and parking garage for the 650,000-square-foot entertainment and retail facility, which is scheduled to open in 2001.

The construction site has been busy for several months, but developer TrizecHahn Corp. of Canada has remained low-key about announcing leasing activity. At the time of project’s groundbreaking in October 1998, entertainer Quincy Jones had signed a lease to open a large live-music club and restaurant and Eastman Kodak Co. indicated its interest in complex.

However, the developer has made no leasing announcements since.

The city of Los Angeles approved plans last month by Los Angeles-based Pacific Theatres to build a 175,000-square-foot entertainment center around the landmark Cinerama Dome on Sunset Boulevard. Work on the $60-million project is expected to start soon. The project, which is 80% leased, will have a 12-screen theater, health club, restaurants and shops.

A legal dispute over parking has stalled plans for a $50-million retail complex at Vine Street and Sunset Boulevard. Developer Regent Properties said the lawsuit filed by affiliates of Meringoff Equities has cost it one tenant and has scared away others that may have signed up. Negotiations are in the works to resolve the dispute and get the Hollywood Marketplace--which has been approved by the city--off the ground.

Long Beach

The developers of Queensway Bay, a $150-million entertainment and shopping complex, are awaiting the sale of municipal bonds later this year before breaking ground.

The bonds will finance the construction of a 2,200-space parking garage at the 20-acre development near downtown Long Beach.

The Edwards Theatres chain has agreed to open a 3,440-seat multiplex movie house at the project, which is being developed by DDR Oliver McMillan of San Diego. The firm has set an opening date of May 2001 for the project.

On a vacant site north of Queensway Bay, Camden Properties Trust of Houston is in the early planning stages for a 9.5-acre residential complex. The firm has said it expects to complete about 400 apartments by 2002 on the site, formerly home to the Pike amusement park.

Santa Monica

Water Garden Phase II--the single largest office project under construction in Los Angeles County--has begun to lease up space as construction crews work to finish the first part of the complex by next July.

The Foothill Group, a subsidiary of Wells Fargo & Co., signed the first lease in September for 60,000 square feet of space. In addition, Santa Monica Bank has leased 30,000 square feet of space for its headquarters, according to Jerome Snyder, whose Los Angeles-based firm, J.H. Snyder & Co, is developing Water Garden Phase II in partnership with Transactional Financial at the intersection of Cloverfield Boulevard and Colorado Avenue.

West Los Angeles

EToys Inc. has agreed to lease the entire 151,000-square-foot office building now under construction at the Westside Media Center.

The four-story structure is scheduled to be completed by October, according to El Segundo-based developer Kilroy Realty Corp. EToys, an Internet retailer focused on children’s toys, will locate its headquarters at the facility.

The rapidly growing company also has an option to lease space in the third and final building planned for the seven-acre office park, which is at the intersection of Olympic Boulevard and Bundy Drive.

Westwood

The $35-million renovation of the former Monty’s building is scheduled to be completed later this month, according to developer Arden Realty.

About 15% of the 21-story building--renamed Westwood Center--has been leased. New tenants include legal research specialist LRN, Lehman Bros. and Grubb & Ellis. Monthly asking rents at the 21-story building exceed $3 a square foot, said Robert Peddicord, senior vice president of marketing and leasing at Arden.

The penthouse space once occupied by the former Monty’s restaurant will be leased to an office tenant. A new restaurant may occupy the ground floor.