March 25, 2014by debbieheinze

By Carrie Rossenfeld

ORANGE COUNTY, CA—Orange County, San Diego and Los Angeles are earlier in the creative-office evolution than the Silicon Valley because these markets are also earlier in the economic-recovery cycle, says Bill Halford, president and CEO of Bixby Land Co. Halford tells that some of the more innovative applications of creative office have not yet hit these markets because “there hasn’t been a driving economy to drive people to develop new properties” in those regions.

Bixby is just beginning to bring some of these new concepts to the Orange County and Los Angeles markets. As reported earlier this week, Bixby is currently putting the finishing touches on a five-story office building redesign in El Segundo and has purchased two Orange County office buildings that will be developed into contemporary multi-tenant office projects. The two Orange County developments are 1501 Quail St. in Newport Beach, which is undergoing a $16.5-million renovation, and 18231 West McDurmott in Irvine, to be renamed “gen2” for its progressive, forward-thinking design. The El Segundo development is 2101 El Segundo, which features a dog park and eco-friendly landscaping.

“If developers aren’t developing, the markets aren’t getting new product, so they aren’t seeing the evolution of what people want,” says Halford. “In the Silicon Valley, it’s a much more vibrant market, so developers are more able to bring what people want to the market. In Orange County, it isn’t that what they want is different, but it hasn’t been able to manifest itself yet.”

Despite their similarity in size, there are marked differences between the office markets in Silicon Valley and Orange County. In a given year, says Halford, the Silicon Valley sees between 15 and 20 deals that are greater than 100,000 square feet, but in Orange County there are only three or four transactions of that size in a typical year. “There’s more big-tenant activity and more tenants with explosive growth in the Silicon Valley. There’s also more of a demand for mini-campuses—three- or four-building campus of 100,000 square feet. Orange County doesn’t have that, but if you get down to it, whether someone has 20,000, 50,000 or 100,000 square feet, they all want the same thing: more indoor/outdoor space, more like your house. And this is all the way down to the smaller tenants. We’re taking the same basic thesis and morphing it to a multi-tenant project, since most smaller tenants have to go into a multi-tenant building.”

Halford also stresses that creative-office development only works in places “where the employers or occupants of the building view the office environment as something other than shelter from the rain. In Ontario, the office market is more of a back-office market with low labor costs, attracting employees in affordable housing. But in the Silicon Valley, I’m competing against Google, so I’d better have good pay structure, a nice culture, a creative work environment and amenities. If you don’t, you won’t get the employees you want. You need to have an environment where the employer can be competitive enough to retain talent.”

In Orange County, markets like this exist in Newport Beach and Irvine, but not so much in Santa Ana and Orange. “If the real estate isn’t relatively expensive, it’s probably not a market this works in,” says Halford. “It works great in West L.A., Playa Vista, North San Diego, Del Mar Heights, UTC. It works where employers are buying for better employees, in higher-priced markets near better or more interesting housing.”

Halford says his firm is focusing on creative office right now because it’s a hot and growing category. He is also focused on doing it well and says other players will get better and it and more focused as the category develops.

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