Industrial real estate has always been a function-first proposition: Warehouses and manufacturing facilities were places where blue-collar workers toiled, with their corporate counterparts housed in office buildings miles away.
But as real estate prices rise and businesses demand greater efficiencies, some companies are rethinking that separation, opting instead to house office employees with warehouse workers to consolidate operations.
In response, several area developers have begun emphasizing the office portions of the industrial buildings they’re constructing, making them bigger and more glamorous than in the past. Buildings that once devoted 5,000 square feet or less to offices are today allocating 20,000 square feet and up, and have added nontraditional amenities such as event rooms, kitchens and lunch rooms, gyms and, at one industrial park, electric-vehicle charging stations.
Irvine developer Sares-Regis Group, for example, built seven speculative industrial buildings in Long Beach in 2012 on a 193-acre site it acquired from the real estate division for aircraft manufacturer Boeing Co. Each of the buildings, which have since sold to owner-users, was constructed in a style the developer called “corporate headquarters industrial.”
“It’s part of ownership, they want their headquarters there and they want it to be nice,” said Larry Lukanish, senior vice president at Sares-Regis.
Refrigeration business Turbo Air Inc. was one such company to set up headquarters offices in a building it bought from Sares-Regis. It bought the 125,000-square-foot building at 4181 E. Conant St., where it built out about 21,500 square feet of office on two levels to include expansive executive offices, a conference room, lunch room and small gym.
Carrie Hoshino, a principal of DRA Architects in Newport Beach, worked with Sares-Regis and Turbo Air to design the offices. She said she noticed companies are not only asking for more office space, but they’re also asking for nicer lobbies.
“They say the lobby is like your face, it’s the first thing people see,” she said.
John Secor, an architect with Archetype International in Tustin, said he’s seen that emphasis particularly with companies that buy buildings rather than lease.
Secor is designing offices in Pomona for Unipac Shipping Inc. The freight-forwarding and logistics company will close escrow next month on a 120,000-square-foot building at Mission 71 Business Park, an industrial park built by Seventh Street Development of Long Beach. Unipac is expanding what was originally conceived to be 9,000 square feet of office to 25,000 square feet.
The trend is not limited to owner-users.
The recent lease between 99 Cents Only Stores Inc. and KTR Capital Partners saw the deep-discount retailer take the entire 615,000-square-foot Garfield Corporate Center in Commerce. It will build out about 30,000 square feet of office in the distribution center to house its corporate headquarters. Mercedes-Benz USA reserved about 100,000 square feet for office and other commercial use at what is now its 1 million-square-foot regional headquarters in Long Beach.
Pacific Industrial, a Long Beach developer that is building an industrial park on 40 acres in Bell, also plans to implement an employee-friendly design strategy as it develops three buildings it plans to lease.
Dan Floriani, a principal and co-founder of Pacific Industrial, said it makes financial sense for companies to incorporate office space into industrial space. While average Class A office rents are $3 a square foot in Los Angeles, average rents for industrial space are only 59 cents a square foot, according to data from Jones Lang LaSalle Inc.
“Just from a pure financial decision, it’s a big incentive for business owners,” he said. “We see this as an evolution that won’t stop, so we’re trying to provide amenities to cater to that and design the buildings with office employees in mind as much as your logistics guy.”
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