By MATHEW PADILLA
Irvine Co. is riding high after Broadcom Corp. this month signed Orange County’s biggest corporate relocation deal in recent memory.
After the buzz wears off, Orange County’s largest landlord faces a sobering reality: Broadcom is set to leave a 450,000-square-foot hole in the 6.4 million-square-foot Irvine Spectrum, much of which is owned by the Irvine Co.
Time is on the Irvine Co.’s side. About two years in fact.
Broadcom doesn’t plan to move its headquarters and other operations to University Research Park , owned jointly by the Irvine Co. and UC Irvine , until early 2007.
Still, news of the move comes as the 5,000-acre Spectrum is posting a comeback from the office-leasing lull of recent years. The Spectrum and other low-rise havens were hit hard by the recession and technology meltdown of a few years ago.
The office vacancy rate in the Spectrum has been falling, with vacancy estimates of between 7.3 percent and 11.4 percent, according to different brokerages who track the market. Orange County’s overall office vacancy rate was 10.5 percent in the fourth quarter, according to CB Richard Ellis Group Inc.
Seeking Another Tech Firm
The Irvine Co. would like to see another tech company take over Broadcom’s three-building corporate campus on Alton Parkway in the Spectrum, according to Steven Case, the company’s senior vice president of leasing.
“We think the buildings lend themselves well to that,” Case said. “The market appears to be strengthening for technology users.”
Case said the Irvine Co. has no plans to chop up the broad low-lying buildings to lease or sell them to smaller users , a fairly strong trend in the Spectrum and elsewhere. The landlord is set to look for one big tenant or a few large ones, he said.
Broadcom’s Spectrum campus is an Orange County tech landmark.
Before Broadcom moved in, the center housed now-defunct computer maker AST Research Inc.
In the 1990s, AST led the area’s technology industry. Back then, Alton Corporate Center was called AST Research Park. But the company , once the county’s biggest tech company , floundered. It was bought by Samsung Electronics Co. in the late 1990s and later scrapped.
The Irvine Co. took back AST Research Park and changed the name, luring Broadcom , now the county’s biggest company of any kind by market value as of this month.
Broadcom’s fortunes also have fluctuated. Via acquisitions, it’s grown into a top communications chip maker.
But those same buys led to years of big net losses and some 500 layoffs in 2002. The chip maker since has returned to profitability.
Broadcom leases some 230,000 square feet at Alton Corporate Center. The company also leases about 220,000 square feet at four buildings on Discover Way.
Now, the company expects to expand, signing a 685,000-square-foot lease with the Irvine Co. at University Research Park.
The developer is set to build eight buildings at the 185-acre office park, which it manages. The deal includes some 200,000 square feet of room for growth.
As it is now, Broadcom plans to move some 1,200 workers from the Spectrum. The chip maker is set to pay $183 million, or about $2.23 per square foot per month, to lease the buildings for 10 years.
Kurt Strasmann, who leads Grubb & Ellis Co. in Orange County, said the type of low-rise space Broadcom is vacating has been popular with mortgage companies.
He said the Irvine Co. has plenty of time to fill up Broadcom’s hole in the Spectrum, but it’s not yet clear what type of company will be interested.
“They have enough time to change with market demand,” Strasmann said of Irvine Co. executives’ plans, post-Broadcom.
The Irvine Co.’s Case said the two-year timeline should work in the landlord’s favor, since the economy appears to be on an upswing.
“It will be one of the few large blocks of space in what we believe will be a very strong market,” Case said.
Mathew Padilla writes for the
Orange County Business Journal.