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Segerstrom's Setback Could Be a Blessing : Analysts Cite Current Office-Space Saturation

March 19, 1986|CARLA LAZZARESCHI | Times Staff Writer

In the late 1970s, when C.J. Segerstrom & Sons broke ground for the first of its Town Center office towers in Costa Mesa, it was blessed with a strong economy and a thriving across-the-street neighbor: its own South Coast Plaza shopping center.

Less obvious, perhaps, was another blessing--a tough-minded City Council in Newport Beach that had vetoed Irvine Co. efforts to expand the Newport Center office complex. As a result, Segerstrom was able to lure tenants to the development it was proclaiming as a central piece of Orange County's emerging "downtown"--an area the developer now calls South Coast Metro. The fight over where the county's downtown is and which major developer is building it goes on, despite the appearance that Segerstrom suffered a setback with the Costa Mesa City Council's dismissal Monday night of the company's plan for a massive office project surrounding a 32-story tower.


A councilman said he did the Segerstroms a favor by calling for withdrawal of plans for a 32-story tower. Part II, Page 1.


Real estate analysts, while mindful of how the Irvine Co. lost some of its momentum because of an uncooperative city council, predict that Segerstrom will not suffer the same fate.

"They have so much momentum already," said Alfred Gobar, a real estate consultant in Brea.

The Costa Mesa council's unanimous vote to ask Segerstrom to withdraw the plan was the company's first major defeat before the City Council in the nearly two decades it has been actively developing its holdings in Costa Mesa, city officials said.

And while Segerstrom must now go back to the drawing boards with its 98-acre Home Ranch development plan, company officials Tuesday downplayed the long-term effect the delay will have on construction in the South Coast Metro area--much of which Segerstrom owns.

Gobar and Irvine real estate consultant Kenneth Agid agreed that the Segerstrom project was hurt byone issue: the 32-story office building proposed as the project's focal point. The 500-foot tower would have been about 75% higher than Orange County's current tallest building, the 287-foot Center Tower, another Segerstrom project next to the Performing Arts Center.

"The issue was the tower," Agid said. "It does not represent a trend toward anti-growth or anti-urbanization in Costa Mesa."

Segerstrom officials, who were shocked by the council's move, said they have yet to decide how to proceed or even if the company will submit another master plan for the area. Gary Frazier, an aide to Henry Segerstrom, said the company may decide to submit individual plans for each building it wants to construct in the area and forego an overall plan.

Agid suggested that the City Council may have unwittingly done Segerstrom a favor by delaying development of the property until leasing rates of the county's burgeoning supply of office space improve. "This is not exactly a great time for leasing," Agid said. "And that project may have been premature."

According to Kenton Boettcher of Newport Economics in Newport Beach, office vacancy in Costa Mesa was 31%, nearly twice the countywide average of 16.3%. Boettcher said the major reason for Costa Mesa's high rate was the recent opening of Segerstrom's Center Tower and another nearby high-rise.

A leasing agent for Center Tower said tenants occupy about 45% of the project's 445,000 square feet. The leasing efforts, which began 18 months ago, have been hampered by the opening of several buildings in Koll Center Irvine and on Irvine Co. land near the John Wayne Airport.

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