Business

Wednesday, Sep 18 2013 06:12 PM

New office project will test local market

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    By Artist's rendering courtesy of Pacific Commercial Realty Advisors

    Local investors propose to build three or four office buildings on a vacant piece of land across Coffee Road from the Town & Country Village shopping center along Stockdale Highway. Located in one of Bakersfield's hottest areas for commercial real estate, the project would be pre-leased and built in phases.

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BY JOHN COX Californian staff writer jcox@bakersfield.com

Southwest Bakersfield, with its booming energy industry and health-care cluster, has gained a reputation as the city's premiere business hub.

But just how attractive the area is as a place to set up shop is being put to a multimillion-dollar test.

A local group recently began soliciting tenant interest in Stockdale Centre, a six-building, 270,000-square-foot office development proposed across Coffee Road from the Town & Country Village shopping center along Stockdale Highway.

Owner GC Investments, which includes members of the Giumarra farming family, has hired an architectural firm to put together designs and a commercial real estate brokerage to market the 15-acre property to potential office space users.

How quickly brokers at Bakersfield's Pacific Commercial Realty Advisors are able to arrange pre-construction lease agreements is expected to determine how quickly the site gets built.

"Once they come, we'll build it," said Duane Keathley, a principal at Pacific Commercial Realty. He added that the property will likely be developed in phases as each of the project's four proposed three-story buildings crosses a 60 percent leasing threshold.

Under one possible scenario, a hotel would be built at the site's northern edge by Westfield Road. If not, all four major buildings would house high-end offices, not including two 6,000- to 9,000-square-foot structures suitable for bank branches or the like.

Total construction cost with full build-out: roughly $50 million, Keathley estimated.

The investment group's decision to finally do something with a long-vacant property has come at a time of very strong market conditions. But it may face tough competition just the same.

Citywide, Bakersfield office space was 9 percent vacant at the end of June -- much better than March 2011's 11.2 percent but well behind March 2007's mark of 4.4 percent, according to a survey put out by Newmark Grubb ASU & Associates.

The property in question borders an area that is by far the strongest office market in the city: University Centre, everything southwest of Gosford Road and Stockdale Highway. Newmark Grubb reported that the area experienced a vacancy rate below 2 percent in June, an indication that demand for space there is extremely high.

For two decades the property was deed-restricted multi-family as a concession to the Town & Country center across Coffee. That meant it could not be turned into anything but apartments or condominiums.

Although the deed restriction expired in 2006, GC Investments opted to hold off -- probably a wise move given that the Great Recession followed soon after.

When at last the local economy began to turn around, the group filed for a zoning change allowing for office development. It won that designation from the city in June.

But now, as Pacific Commercial Realty hunts for tenants, it must compete with other office complexes proposed nearby -- most of which offer something Stockdale Centre doesn't: a purchase option.

Bakersfield broker Mark Smith, a principal at Newmark Grubb, said at least two different companies, not counting GC Investments, are working to develop some 150,000 square feet of office space for lease in the University Centre area. He noted that large office properties in the southwest have recently gone to buyers, not renters.

Keathley said Stockdale Centre may offer entire buildings for sale but that the general idea is for the investment group to own and manage the property long-term.

Smith wondered whether that decision could slow the project's timetable.

"There is some (leasing) demand. There's no question," he said. "But that's a lot of square footage to absorb."

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