A rendering of the proposed new tower at Two Town Center.

While office properties remain at the top of many investors’ lists today regardless of a soft market, some submarkets are still in demand by tenants seeking office space. One of these submarkets is at the center of Orange County, California, adjacent to Costa Mesa’s South Coast Plaza. There is strong demand for Class A office space in this area of Costa Mesa, considered by many to be the cultural center of Orange County. In 1999, CommonWealth Partners purchased Two Town Center, a multi-building office development, from the Segerstrom Family, which also owns South Coast Plaza.

Since acquiring Two Town Center, CommonWealth has been devising plans for the low-profile, high density development. Chief among those plans is an 18-story, 400,000-square-foot office tower that will have visibility from three major Orange County freeways, the 405, 55 and 73. Designed by Johnson Fain Architects, it will be the first high-rise office building to be developed in Costa Mesa since 1992.

Currently, Two Town Center consists of twin 15-story office towers, an eight-story office building, a five-story office building, four freestanding restaurants, and several parking structures and lots. Blue chip tenants at the complex include Comerica, State Farm Insurance, Washington Mutual, GMAC, BDO Seideman and Bank of America. In total, there are 840,000 square feet in the project, which is nearly 90 percent leased.

Brett Munger, chief operating officer of CommonWealth Partners

“This was an extremely rare opportunity to acquire an asset of such quality in this location,” says Brett Munger, chief operating officer of CommonWealth Partners. “With John Wayne airport nearby, existing hotels and restaurants within just a few minutes’ walk, access to one of America’s highest educated workforces and one of the nation’s highest performing shopping centers across the street, you have a winning location.”

Two Town Center is also located at the center of Orange County’s Theater and Arts District, comprised of the Orange County Performing Arts Center, South Coast Repertory Theatre and a new concert hall under construction. In addition, the California Scenario, a 1.6-acre sculpture garden and plaza designed by Japanese artist Isamu Noguchi, is located between Two Town Center’s twin 15-story office towers, offering its own attraction to the area.

John Krappman, vice president of CommonWealth Partners, discusses plans for new development at Two Town Center in Orange County, California.

The new tower will increase the size of Two Town Center by 50 percent. “The development site affords us a unique opportunity to combine the superior access and visibility of the project,” says John Krappman, vice president of CommonWealth Partners. “It will be the only high quality, high-rise building right on the freeway. It will probably have the greatest prominence of any building in Orange County.”

Prospective tenants for the new tower are much the same as Two Town Center’s existing tenants: national accounting and banking firms and strong regional and local law firms.

“While the office market is soft in certain areas, given the Southern California economy, we are responding to the demand characteristics of our specific tenant base,” says Krappman. “We have historically dealt with major tenants who want Class A space. That’s who we’ll be dealing with to kick this project off.”

CommonWealth Partners does not plan for the new tower to be built on spec. It has specific tenants in mind and is waiting for them to commit before beginning construction. Like most in the office business these days, the firm isn’t counting its chicks before they hatch. CommonWealth has a 20-year development agreement for the property, and it has received all discretionary approvals from the city, so it can strike as soon as the market is ready.

The design of the new tower is paramount because of the visibility it will have from the freeway. Using mostly glass, the modern-inspired building will complement the current buildings at Two Town Center, while at the same time having its own identity. The design incorporates 23,000-square-foot floorplates and provides excellent views of the Pacific Ocean from higher floors as well as plenty of corner office opportunities, says Krappman.

In the meantime, CommonWealth is continuing to improve the rest of Two Town Center by developing a new 8,200-square-foot restaurant — Chat Noir by acclaimed restaurateur David Wilhelm — on an existing outparcel that will open this fall. Office tenants like Ditech, a division of GMAC, continue to expand and take vacant space at the project as well, creating further demand.

“Momentum has been tremendous,” says Munger. “We have had a lot of tenants renew their leases this year and add more space that was lost in recent years from technology and accounting tenants. We have also gained new tenants from nearby developments who were looking for better locations and a more prestigious area.”

Formed in 1996 by a senior team from Maguire Thomas Partners, CommonWealth Partners has grown quickly in its 8-year history. The company now owns and manages a $1.3 billion portfolio of high-quality office space in California and the Southwest U.S. CommonWealth is the managing member of a joint venture with CalPERS, under which it buys, develops and manages properties and it will use some of that power to create the new office tower at Two Town Center.

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