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Tuesday, Jun 25, 2024

Traditional Firms Seek Nontraditional Office, Retail Space

Nontraditional office and retail space in Downtown San Diego is increasingly in demand.

It’s space that typically attracts some of the area’s more creative firms, such as architects and advertising companies.

But these days it is appealing to insurance brokers, technology firms and attorneys, said Brad Perry, a vice president and leasing broker at San Diego-based Burnham Real Estate’s Downtown office.

Nontraditional office space, which in Perry’s words is “something funky, something different,” can typically be identified by its artistic layout, including high vaulted ceilings, wooden floors, brick walls, exposed mechanical and electrical wiring and hanging high lights.

Whether they are created through tenant improvement projects in Downtown’s traditional high-rise office buildings , such as the Los Angeles-based Nadel Architects, Inc.’s office at 625 Broadway , or located in the midst of a parking garage , such as the Golba Architecture firm’s office in the Laurel Travel Center at 1025 Laurel St. , nontraditional offices of varying designs and styles are in demand Downtown.

“There is an increasing number of people calling brokers looking for nontraditional space in Downtown San Diego, saying they don’t really want a high-rise,” said Perry. He attributes the surge in demand in the last 18 months to the boom in residential development Downtown, which has attracted young entrepreneurs with smaller businesses.

Last summer, Nadel Architects moved its 30 employees from a traditional office in Sorrento Mesa to Downtown to place itself “at the hub of where the action is,” said Dale Jenkins, a vice president in the commercial group there.

Hans Strom, a tenant representative broker helped the firm secure a 5,500-square-foot office space on the ninth floor of one of the oldest buildings in Downtown San Diego, 625 Broadway, built in 1926 and designated a historical site in 1983, and then helped it gain permission to transform the space entirely.

Within 90 days, Nadel installed a rolling garage door in the office entryway outside the elevator shaft and gutted the space, removing the ceilings, lighting fixtures and office walls to create a wide-open, studio-style office space, interspersed with purple, red and gray walls.

In Demand

As demand for such lease space has grown, so too have the number of tenant and landlord representatives that focus, to a greater degree, on nontraditional tenants.

Strom, a longtime commercial broker and tenant representative in San Diego, thinks he has found a way to corner this market from the tenant side and the landlord side.

For Strom, it’s simple: “Our goal is to provide full service brokerage to the smaller properties that bigger brokerage firms can’t afford to focus on We contacted landlords and built a database of unique spaces by finding what’s available, no matter how small the size.”

Larger brokerage firms such as CB Richard Ellis and Irving Hughes, where Strom formerly worked, appear to be in for some competition.

Strom’s lime green-striped rectangular for-lease signs have become a fixture in a majority of Downtown’s fastest-growing neighborhoods. Especially those located outside of the Gaslamp Quarter, which may be considered “off the beaten path.”

“We specialize in spaces that architects and creative firms are attracted to (in) the East Village, Barrio Logan and the Ballpark District. We have no high-rise spaces in our portfolio, rather brick warehouse spaces or historic buildings,” said Steven Martini, Strom’s business partner.

Strom’s firm, Strom Commercial Real Estate, which does about 50 percent leasing (half of which is tenant rep and the other half is landlord rep) and 50 percent property sales, set up shop Downtown last year on the second floor of a dance studio in a high-ceiling open loft, lined with floor-to-ceiling windows, overlooking Eighth Avenue.

Strom, 43, and his partner, Martini, 26, seem to be leasing a majority of the more creative office and retail space in the Downtown area. Last year, they helped furniture retailer, San Francisco-based Design Within Reach, secure a studio on J Street and Seventh Avenue in the historic Simon Levi Building in the East Village area. Strom also represents 100,000 square feet of office space at the Spreckels Theatre Building at 101-145 Broadway and the Louis Bank of Commerce Building at 835 Fifth Ave.

Since January, the number of listings for Strom in the nontraditional office and retail space on the landlord side has grown from five to 19, and the firm has taken on three additional brokers, for a total of six employees.

At 701 C St., around the corner from its office, Strom represented a landlord that recently leased space in an old law firm to a nightclub (the name of which Strom is not yet ready to divulge). And catty-corner, at 640 C St. in the space that once housed the Computer Museum of America, Strom is actively seeking a nightclub tenant. Martini calls the strip of C Street near and around the Broadway intersection near the On Broadway Night Club, the new “club corridor,” which Strom has helped to create through the leasing of nontraditional office and retail space to nontraditional users.

At 721 Ninth St. in the East Village area of Downtown, Martini said he stumbled upon a for-lease, one-story, ivy-covered brick gallery space owned by a local artist, Doron Rosenthal. When Martini informed him that the building would fit into Strom’s “niche for creative and architecturally sound space,” Rosenthal signed a leasing agreement the next day, Martini said.

Martini said he had a lease signed for the biggest suite in the building , a 1,200-square-foot rectangular space , within one week for the tenants, San Diego-based Premise Sports Marketing, for $2 per square foot.

While Strom has done well on the tenant representation side , although it represents about a quarter of the brokerage business, Martini said it accounts for a majority of revenue.

Difference Of Opinion

But not all Downtown brokers agree that the market for nontraditional space is expanding.

Kraig Kristofferson, a senior vice president at the Downtown office of CB Richard Ellis and a longtime leasing broker, said he has not seen an increase in demand for space that lends itself to a “funkier and more artistic” layout.

“I think it was probably more typical during the tech craze to see spaces being built out in nontraditional ways and some of those spaces that were built out in high-rises Downtown are more difficult to lease to tenants now,” said Kristofferson. “While it was very impressive space for a high-tech user or an architect or PR firm, this is not generally who the tenants are Downtown.”

Kristofferson, who represents numerous high-rise office landlords Downtown, said he has seen some interest among potential high-rise tenants to alter their offices by exposing the ceilings and creating more open spaces. But for more intricate , and expensive , features such as adding an indoor basketball hoop or an indoor garage door to the entryway, it is difficult for the landlord to refit the space for traditional office use when future tenants move in.

Kristofferson questioned why high-rises would be targeted for nontraditional build-outs in the first place.

“Typically, people interested in the nontraditional space are not keen on riding up and down the elevator with the suits,” he said.

Alternatively, Perry said new projects such as the office condos under construction at the 19,500-square-foot TR Produce Building across from Petco Park, scheduled for completion in May 2006, will house traditional tenants , law offices, medical offices and insurance brokers , in nontraditional spaces.

In the meantime, Strom Commercial’s conspicuous lime green-striped signs continue to proliferate throughout all quarters of Downtown San Diego, from the Gaslamp to Barrio Logan. And that can only mean good things for tenants seeking to break away from traditional office setups.


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