El Segundo developers get creative with 15-building office complex - for lease or for sale
Amid the vast sea of office buildings and industrial plants just south of Los Angeles International Airport, a new office campus is emerging with a 21st century look starkly distinct from its baby boom-era neighbors.
While most of Southern California's office market remains stuck in neutral as businesses decline to expand, developers in El Segundo are about to risk millions of dollars building the offices.
In contrast to its more monolithic neighbors, the new complex will have 15 office buildings of widely varying sizes and shapes intended to appeal to firms in the few sectors that are expanding, such as technology and entertainment.
These professions are a target for landlords regionwide, but developers of this complex think they have an edge: Their buildings will be for sale.
"There are plenty of opportunities to lease, but we believe there are very few opportunities to purchase creative space from the Westside all the way to Long Beach," said Robert E. Tarnofsky, director of real estate for Continental Development Corp., El Segundo's biggest office landlord.
The project is one of the first new developments in El Segundo since the recession brought the real estate market to a halt in the late 2000s.
Continental Development and Mar Ventures Inc. of Torrance will build the complex they call Elevon on 46.5 acres of vacant land on a block south of the 105 Freeway surrounded by Douglas and Nash streets and Mariposa and Maple avenues.
Long a bastion of aerospace and defense businesses, El Segundo is an emerging market for technology, media and entertainment companies. The city and nearby Playa Vista boast cheaper rents than Santa Monica and other Westside neighborhoods popular with growing tech firms.
Most such firms avoid the shiny glass and steel buildings found in downtown Los Angeles, Century City and other conventional office markets in favor of older industrial buildings converted to office use, often in unusual ways.
The trend is so widespread that "anybody who has an old, tired building that is vacant now calls it creative space," Tarnofsky said.
He thinks Continental can compete by offering features creative firms find attractive, such as high ceilings, porches and outdoor recreation spaces. Elevon will also have modern systems such as lighting and heating rarely found in older buildings, and a substantial number of parking spaces.
Elevon will also have shops and restaurants intended to serve occupants, Tarnofsky said. Continental will start construction next month and the $97-million complex will begin to open by next fall.
He declined to say how much the buildings and units ranging from 2,000 to 28,000 square feet will cost to buy.
Elevon is an extension of Campus El Segundo, a mixed-use development to the north of offices, stores, athletic fields and a Hyatt Place hotel, Tarnofsky said.
In addition to the current project, the Elevon block also has city approvals for as much as 750,000 square feet of further development on two other parcels totaling more than 10 acres.
Continental plans to erect buildings on those lots to meet the specifications of buyers or renters in what is known as "build to suit" construction.
Elevon is unusual because it is speculative development by Continental and its partners, meaning they will start work without having a committed buyer or tenant, real estate broker Steve Solomon of Jones Lang LaSalle said.
Elevon also marks a return to construction in the neighborhood after the economic downturn, Solomon said. "There has been no new product built in El Segundo in over five years."
El Segundo was formerly known as an aerospace hub in the shadow of the airport and as a refinery town — its name derives from the 1911 selection of the spot by Standard Oil Co. of California for the company's second oil refinery.
Continental Development has an aerospace background dating to the 1950s and owns more than 3 million square feet of commercial space in El Segundo.
In the 1990s, however, the company's Continental Park offices were on the wrong end of the "peace dividend" that came with the end of the Cold War. Many of the company's aerospace tenants disappeared.
Continental built restaurants, shops and theaters in the hope of making the neighborhood appeal to a broader range of tenants. Elevon marks a new phase in the company's repositioning.
"Right now the bulk of demand for office space is coming from users who are somehow involved in technology," Tarnofsky said. "This space is designed to meet their unique demands."
LA Times 10/17/13
*Shared by Jeff Vertun, Scott Steuber & Ted Simpson