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Culver City Gets Lesson in Risks of Office Development
Real Estate
by Danny King
The future is not now for a portion of Culver City’s Town Plaza.
The city and its development partner, San Diego-based OliverMcMillan LLC, are about to put the office and restaurant components of the project on indefinite hold.
Groundbreaking for the 1,800-seat Pacific Theaters venue, Trader Joe’s and parking portions of the 459,000 square foot mixed-use project, at the intersection of Washington and Culver boulevards, is still slated to happen in April.
“We’re going to work together to find out when to actually do it,” said Paul Buss, OliverMcMillan executive vice president. “It’s not right now.”
Mark Wardlaw, deputy community development director for Culver City, was more succinct. “We’re not going to build a spec office building.”
That portion of the development called for a 70,000 square foot office building and 23,000 square feet devoted to restaurants.
Buss said none of the office or restaurant space had been pre-leased, and that negotiations with potential restaurant tenants were halted by the events of Sept. 11.
Meanwhile, the softening commercial market has forced both the city and the developers to reassess the viability of the office component. According to Insignia/ESG Inc. data, Culver City office vacancies hit 12 percent in the fourth quarter, compared with 2 percent a year earlier. Average asking rent fell to $2.45 per foot per month from $2.56 a year ago.
Taylor Made
The office development at the old Taylor Yards site near the intersection of the Golden State (5) and Glendale (2) freeways is picking up steam.
The Los Angeles Media Tech Center landed two deals totaling 54,000 square feet at its 390,000 square foot Phase One development, with total consideration at $11 million.
Los Angeles Unified School District will be taking space for its transportation division, signing a 10-year, deal for 35,000 square feet at 2710 Media Tech Center. Bank One will be moving its check processing center from Pasadena to the same building, taking 19,000 square feet in a 10-year deal worth $3.9 million.
The Media Tech Center, which was developed by a partnership of AMB Property Corporation and Legacy Partners and whose first phase was completed in October 2000, will break ground on its second phase upon the lease-up of Phase One.
That may be close to happening, according to Dave Harding, the CB Richard Ellis first vice president representing the landlords. Harding said that with two recently closed deals and two more in negotiation, phase one would be 90 percent of occupied within the next couple months.
“The amenities base is not as mature as neighboring Glendale or Pasadena, but it still provides the employees with a central location,” said Grubb & Ellis Co. Senior Vice President Bill Boyd. He added that the rising office rental rates in Glendale would continue to drive tenants toward less expensive alternatives like the Media Tech Center.
Price was a factor for Bank One.
“(Bank One) was able to significantly reduce occupancy costs and get a brand new building,” said Trammell Crow Co. Senior Vice President Jonathan Larsen, who, with Trammell Crow’s Lisa St. John, represented both tenants on the deals. Larsen estimated that the $1.69 a foot Bank One will be paying is about a dollar less a foot than it would’ve had to pay to stay in Pasadena.
Secret Handshake?
The loft frenzy that has struck downtown developers is now moving down the Long Beach (710) Freeway.
Santa Monica-based New Urban West Inc. is developing 150,000 square feet of live/work loft space at the site of the old Masonic Temple in downtown Long Beach. The company plans to begin the rehab on The Temple Loft project during the second half of the year, with the 80 units on the market by late 2003. Units will range in size from 1,000 to 2,400 square feet and sell for between $200,000 to $500,000.
Entitlements for residential development of the 1.5-acre plot of land, which New Urban West bought last year for $2 million, have yet to be granted by the Long Beach Planning Commission. But the land had been previously entitled for a 72-unit loft project in 1999, according to Adam Browning, group vice president of New Urban West.
The project, which is located on the northeast corner of 8th and Locust streets, is part of a north downtown redevelopment push that includes the $75 million CityPlace project at the old Long Beach Plaza Mall, as well as another 16-unit loft development at 8th Street and Pine Avenue.
It also will include the rehabbing of The Masonic Temple, along with a build-out of two structures flanking the 75-year-old building.
“It’s an amazing old building,” said Browning, who cited its 25-foot-tall ceilings and concrete columns. “It’s a wonderful stage to start a loft project.”
Santa Monica Exodus
The ocean breeze isn’t the only thing that continues to cool off Santa Monica.
Clinical research firm Specialty Laboratories Inc. will move its 50,000-square-foot offices at Water Garden and 80,000-square-feet of lab space at Cloverfield to a 14-acre site it purchased in Valencia. The move will come next summer, when construction of its new, 200,000-square-foot headquarters should be completed.
“What (Specialty) determined was that the real estate costs in Santa Monica were really prohibitive,” said Gerald Porter, vice chairman at CRESA Partners, who represented Specialty Labs. He noted that land costs in Valencia are about a fifth of those in Santa Monica, and added that homes in Valencia go for as little as $150,000. The means technicians who can’t afford to buy on the Westside could do so near the new headquarters, potentially reducing staff turnover in the process.
Its all part of a trend Porter sees to exit the expensive market. It’s also part of a trend he’s helping initiate.
Porter is repping advertising agency Rubin Postaer and Associates and Symantec Corp., both of which could follow Specialty Laboratories’ lead. Symantec, which currently leases space in MGM Plaza, is looking for 200,000 square feet to purchase, while Rubin Postaer is looking to combine its four downtown Santa Monica offices into one 150,000-square-foot site.
Staff reporter Danny King can be reached at (323) 549-5225 ext. 230 or at
[email protected].
