It is time to update as we kick off summer. In Orange County the pace of play for companies and big announcements continues to new levels.
City of Hope
The biggest announcement this quarter is that the City of Hope has announced an expansion of their plans to buy and build out the county’s newest cancer center in Irvine. The City of Hope has chosen the Five Point Communities office development, originally built by Broadcom, just across the freeway from our Irvine office. You can read more about it here.
- City of Hope plans to invest more than $1B to develop and support a comprehensive cancer campus of the future that will change the way cancer care is delivered in Orange County, California.
- In collaboration with partner FivePoint Holdings, LLC (NYSE:FPH), an owner and developer of large mixed-use, master-planned communities in California, City of Hope is purchasing approximately 11 acres of land – including a building of approximately 190,000 square feet – at FivePoint Gateway in Irvine, for its cancer campus expected to open in 2021.
- The state-of-the-art comprehensive cancer campus is expected to include an outpatient center, a clinical research center with access to phase I-III clinical trials, integrated cancer preventative care utilizing emerging technologies and Orange County’s only specialty hospital focused exclusively on treating and curing cancer.
- Evolution in strategy speeds City of Hope’s unparalleled care, scientific breakthroughs and new treatments to a community with growing needs.
Having several clients in the life science space in Orange County, this will help increase the synergy and Irvine’s ability to draw talent.
Financing for business owners to buy their own office, medical and industrial properties is as plentiful as ever. For businesses to buy their own building, we are seeing underwriters able to gain initial underwriting approval in 15 days and being able to close SBA loans in 60 days or less. Blended interest rates on 25 year amortization loans are averaging 4.25% with up to 90% loan to value. The inventory is historically low so buyers and brokers need to be creative. I’m working on an escrow of an industrial building now, where we had to structure a lease termination of an existing tenant to be able to make the building available. All parties had to pitch in to pay part of the tenant’s cost to relocate. Fortunately the SBA loans provide for the buyer to have up to 6 months before they have to occupy which can give buyer’s some flexibility in their timing and tenant improvements.
My inventory of listings spans Orange County and Los Angeles counties. I’m fortunately that my clients have taken me to almost every city in the Southern California. There are few cities that I don’t have active assignments in. Of the 27 listings that I have at present, I am noticing that the smaller office spaces which usually lease up quickly, are taking longer to lease. Coincidentally, I read an interesting research article this week, in the suburban Chicago market, that illustrated the lease up time for traditional, creative and industrial spaces smaller than 5,000 SF. The time from vacant to signed lease declined by 50% when taking this approach. My motto is, “fight vacancy like the plague.” I believe this approach can shave 3-6 months off the leasing cycle.
The moral of the story is to get your space ready as soon as it is vacant rather than worry that you are building out a layout that a new tenant isn’t going to value. Tenant’s in that size range want to see and lease space quickly. Tenants don’t want to wait for the landlord to build out, even if it is to their specification. Institutional landlords get this and always “clean and show” their space right away however private landlords, mom & pops, high net worth individuals and family offices rarely do. Now is the time to make that shift, invest in the space first and watch your leasing activity increase dramatically.
You can access our National Market Report here. This report details the major markets for office, industrial and retail properties across the nation.
Let me know when you are ready to discuss your next real estate project. Looking forward to it! Thank you.