A two-building office campus is Santa Ana is being torn to shreds this week as a redevelopment project ratchets into high gear.
Kearny Real Estate is replacing Elevate@Harbor at 3100 and 3130 S. Harbor Blvd. with a logistics warehouse.
Among Elevate’s tenants was Optima Tax Relief, which has since shifted its headquarters to Griffin Towers on Hutton Center Drive next to the 55 freeway. CEO David King told the Register last May that the move was overdue, as the Elevate building was “past its prime.”
Office space is experiencing a shift as landlords weigh the pros and cons of renovating aging buildings as post-pandemic demand remains weak. We’ll note that Optima’s new home sold at a 36% loss in April when Barker Pacific Group and Kingsbarn Realty Capital bought it from Blackstone for $82 million.
Kearny is not alone in the push to replace low-rise office complexes with industrial. The industrial conversion trend has gained traction, especially in Santa Ana, which has a large cohort of older office and commercial campuses that are struggling to maintain tenants.
Kidder Mathews in a 2023 fourth-quarter report released in January said Orange County’s industrial market “continues to be strongly competitive, despite a decline in demand from its peaks in the prior year.”
Vacancy rates for industrial properties were 2.6% in the quarter. The average price per square foot was $305, while the cap rate was 4.7%.
The office vacancy rate, by comparison, was 12.4%, according to a separate Kidder Mathews’ report on office space in the county.
“The pandemic’s continued implications for Orange County’s office market have resulted in many companies reducing their workspaces or adapting to hybrid work arrangements due to the escalating costs of office space,” the brokerage’s researchers said.
Just a few miles to the east in Santa Ana, another single-story property is being redeveloped into a warehouse.
The three-building commercial complex at…
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