If you’ve spent any time at all in the Newport Center / Fashion Island area lately, you’ve undoubtedly seen that there are some big changes happening as it relates to the office landscape. Some of these changes are obvious to the naked eye, and some are not so easy to spot.
Lets start with the obvious changes. PIMCO’s new headquarters on the site of the former Twin Palms restaurant is nearly complete. This 380,000 square foot tower developed by The Irvine Company will be the new home to most of PIMCO’s Southern California operations beginning in the 3rd quarter of 2014. In the meantime, all of the space PIMCO currently occupies at Pacific Financial Plaza (800 & 840 Newport Center Drive) is currently being pre-leased by The Irvine Company. As of the date of this posting, The Irvine Company reports to have leased eight (8) of the floors being vacated by PIMCO.
While this sounds like a “win/win” for The Irvine Company, what many are not aware of is that several of the tenants moving into the former PIMCO space are current Irvine Company tenants who will be vacating other Irvine-owned properties within Newport Center. This, when combined with the other new tower currently under construction behind the 500 / 550 Newport Center Drive buildings may create an abundance of class “A” vacancy within Newport Center, the likes of which I have never seen in my 20+ years of working as a tenant representation specialist.
A possible “Ace” The Irvine Company may have up their sleeve is the fact that 2 of their older low-rise projects, Gateway Plaza and San Joaquin Plaza, are slated to be razed and likely be developed as luxury apartments. This will take nearly 350,000 square feet off the market and force the occupants of those buildings to seek space elsewhere. Whether they will “trade-up” into either the new high-rise product, or existing high-rise being vacated by other tenants has yet to be determined.
With these moves, The Irvine Company’s message and strategy are clear: Newport Center and Fashion Island are being upgraded. Fewer low-rise office buildings, more luxury apartments, more class “A” high rise buildings. Not to mention the new restaurants and retail being added at Fashion Island. With these changes I would expect that The Irvine Company will be expecting rents to increase. With some recent transactions closing above $5.00 per square foot, one may wonder when tenants will say “uncle” and make the long commute “over the hill” to the John Wayne Airport.
If you have any questions about the information in this post, or about your office lease, please contact Bill White of White Space Advisors at 949-721-8880 or via email at email@example.com