Defying the current slump in the office construction and leasing industry, the Koll Co. has completed its third 11-story office tower at the Koll Center Irvine, with 90% of the $40-million building leased on opening day.
Further grating on its competitors, some of whom have only 50% or less of their new buildings rented, the Newport Beach development company announced Tuesday that it has started leasing space in the last 11-story building on the same site. Ground-breaking is scheduled for this fall.
Koll officials could not be reached Tuesday to explain how the company has managed to defy the trend, but one competitor suggested that Koll has surged ahead of builders in the John Wayne Airport area largely because it was quicker to begin building and marketing its project.
But several analysts questioned whether Koll or any company can continue building and finding tenants in the current market.
The vacancy rate among new office buildings in the airport area is more than 33%, said Scott Perley, vice president and resident manager of Coldwell Banker, a commercial real estate brokerage company. Countywide, the office building vacancy rate is 20%, he said.
The Irvine Co., Koll's major competitor, has leased less than half the space in its two airport-area office projects but expects the rest to be absorbed in a reasonably short time, according to Sam Haynes, the Irvine Co.'s vice president for marketing.
He said, however, that his company has temporarily halted further office construction, deciding that "it might be prudent not to build in a market that might face a glut."
Haynes credits Koll with providing hotel and meeting space and top quality restaurants at its business center--something, he said, that tenants want almost as much as they want discounts on their leases.
But Haynes attributed Koll's success to the fact that it was the first of the developers to get its tenants signed up and its building done since last fall--when the vacancy rate around the airport was only about 9% and new space was needed.
Koll's latest building in the 90-acre center near the airport has the National Education Corp. as its lead tenant, occupying the top two floors of the 230,000-square-foot building. The accounting firm of Ernst & Whinney also has leased two floors, while a law firm and three other companies have taken one floor each.