Business Park Is Planned for Lake Forest

Unfazed by the commercial real estate slowdown, a pair of Orange County companies will announce plans today to develop an office and industrial park in south Orange County.

Shea Properties and Baker Ranch Properties plan to start work early next year to convert 380 acres in the foothills of Lake Forest into a sprawling business campus. Shea and Baker, which owns the land, said the project would add about 5 million square feet of commercial space over seven to 10 years. Shea estimated the project will cost $450 million.

But no tenants have been signed, and south Orange County’s office landlords are contending with a nearly 20% vacancy rate--the highest among major Southland areas.

What’s more, an even bigger office development in nearby Irvine already is underway by Irvine Co. That project, combined with the Shea-Baker development, could nearly double the size of south Orange County’s office market to roughly 30 million square feet, as much as in downtown Los Angeles.

Gene Spindler, a vice president at Shea, a major construction and development company in Aliso Viejo, said his firm was watching the market carefully. Though construction is expected to begin early next year, Spindler said the project would be built over five phases and will be “market driven,” meaning it will be developed as needed.

Despite the current office glut, Spindler and some industry experts were optimistic about the corporate park’s prospects. Shea, which plans to develop the land and offices, said it expects the park to attract high-tech companies as well as finance and insurance firms and other traditional office tenants.

“Even with the current state of overbuilding in south Orange County, there is a scarcity of land,” said Steve Case, senior managing director at CB Richard Ellis in Anaheim, a commercial real estate brokerage. “For companies that want the flexibility to build their own campuses, there are very few alternatives, and this will be one of the best opportunities in Orange County for the next several years.”

Shea and Baker are betting that businesses will be drawn to the large amount of space available on the campus as well as the business park’s proximity to tollways and clusters of attractive housing in Lake Forest and such nearby areas as Mission Viejo. What’s more, if an airport is built at the former El Toro Marine base, that also probably would boost commercial demand in that area.

South Orange County, which stretches from Irvine to San Clemente, has been a booming business and residential center, but its office market--dominated by low-rise buildings in campus settings--has been clobbered by the retrenchment in the high-tech sector and the dot-com industry. The area’s vacancy rate nearly doubled in the last year to more than 19% in the second quarter.

The site of the Shea-Baker project is the last major piece of some 5,000 acres owned by the Baker family and A.J. West in the late 1950s. Over the years, parcels were sold off and eventually developed into the city of Lake Forest. Baker’s grandchildren co-manage the remaining holdings, including the 380-acre development site, which until just two years ago was used for growing oranges and avocados.

“We’ll absorb as the market lets us,” said Michael Watkins, a major league baseball agent in Newport Beach who co-manages the property with his cousin Chris Veitch. He said permits were garnered more than 20 years ago for the site, but housing never was considered because the site was too close to the El Toro base.

Baker and Shea are expected to be long-term partners in the venture, which will be managed by Shea.

The Lake Forest development is the biggest Orange County project for 24-year-old Shea. The company, which has 260 employees, is the commercial division of J.F. Shea Co. of Aliso Viejo, which owns 3.2 million square feet of commercial properties and 5,800 apartment units.