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Western Dig Returns to Irvine With Lease

Western Digital Corp. is coming back to Irvine in much better shape than when it left nearly a decade ago.

When the company swapped its Irvine Spectrum digs for an office in Lake Forest in 2000, it was losing money and market share in the cut-throat disk drive market.

Western Digital was looking to save money wherever it could to alleviate the effects of its slumping business, including by cutting back on rent.

The company, which makes disk drives for computers and consumer electronics, counted a market value of about $3.5 billion when it moved from a flashy Irvine Company high-rise in the Spectrum to a more low-key office campus in Lake Forest.

Nearly 10 years later—and with the Lake Forest lease nearing its end—Western Digital’s fortunes are decidedly different.

The company had a recent market value of about $8 billion, making it the third-largest publicly traded company by market value in Orange County behind Allergan Inc. at $17 billion and Broadcom Corp. at $14.4 billion.

Its shares have nearly tripled this year, buoyed in large part by what Wall Street considers to be an adept handling of the industry’s slowdown amid the recession.

Investors also are bullish about the company’s push into a new type of drive that uses flash memory chips instead of spinning disks to store data.

Last week the company said it plans to relocate its headquarters again, this time from Lake Forest back to Irvine.

Rather than the Spectrum, this time the company’s moving close to John Wayne Airport. It’s taking space at the massive Park Place campus that runs along the San Diego (I-405) Freeway, just off Jamboree Road.

The 10-year lease is for 365,000 square feet, or roughly the size of a 15-floor high-rise.

It’s the largest office lease signed in OC in several years.

Terms of the deal weren’t disclosed. With the local office market in the worst shape it’s been in years, it’s likely Western Digital got a much better rate than it would have a year or two ago.

Up until now, the biggest local office relocation the county’s seen recently was in 2007, when Los Angeles-based mutual fund manager Capital Group Cos. moved its local operations from Brea to a new, 650,000-square-foot Irvine Spectrum campus.

Other notable moves include Broadcom Corp.’s move to its 685,000-square-foot campus at Irvine’s University Research Park in 2007, as well as Blizzard Entertainment Inc. subsequent move to Broadcom’s vacated three-building Irvine Spectrum campus, which totals 235,000 square feet.

1,250 Workers

Western Digital will be moving about 1,250 workers to Park Place, which has been used in movies such as “Demolition Man” to represent futuristic architecture.

The office complex was built by Fluor Corp., which had its headquarters there before moving to Aliso Viejo and then Texas, where it’s now based.

The space Western Digital’s moving into—a mix of office and concourse space—includes much of the space previously used by Omaha, Neb.-based ConAgra Foods Inc.’s grocery food unit.

ConAgra left in 2006.

The buildings are part of the 1.7 million square feet of office space that was taken over by Irvine-based LBA Realty in August.

LBA Realty acquired debt on the Park Place property at a discount earlier this year. It took over ownership after Los Angeles-based Maguire Properties Inc. opted to hand back the keys to part of the campus in an effort to save cash.

The Western Digital deal brings together “one of Orange County’s most respected companies with one of its most respected landlords,” said Royce Sharf, executive vice president for the Irvine office of tenant brokerage Studley Inc., which represented Western Digital.

Other big tenants at Park Place include Prudential Financial Inc., State Farm Life Insurance Co., Balboa Insurance Group Inc. and the California Department of Transportation.

Western Digital is set to combine its Southern California operations into the new headquarters starting later next year. That will include an existing 60,000-square-foot facility in Irvine that the company used as a disk drive return and refurbishing center.

The company makes drives and parts in Malaysia and Thailand.

The move’s being made to “facilitate tighter team collaboration, improve operational efficiencies, rationalize facilities costs and offer flexibility for future growth,” said John Coyne, Western Digital’s chief executive.

One area the company’s looking to grow is in the design of a new type of drive that uses flash memory.

In March, Western Digital paid $65 million for SiliconSystems Inc., a maker of flash-based drives known as solid state drives since they have no moving parts.

The company plans to release a solid state drive for servers and data storage computers in 2011.

Western Digital and its chief disk drive rival, Scotts Valley-based Seagate Technology LLC, trail Santa Ana-based STEC Inc. in the market for flash drives.

SiliconSystems had been leasing 34,000 square feet of space in Aliso Viejo. Workers there are set to move to Park Place.

The latest move likely won’t have as much of an impact as Western Digital’s prior relocations.

Western Digital’s initial move to the Spectrum helped the area become the county’s top technology park. Its building there was long known as the “Western Digital building.”

The company reportedly opted to look elsewhere after seeing asking rents for its office tower run close to $3 per square foot, the high end of the market at that time.

Among other locations Western Digital eyed for space at the time was Park Place.

Lake Forest

In mid-2000, Western Digital eventually opted to move its administrative and engineering activities to a more affordable three-building campus on Lake Forest Drive totaling about 187,000 square feet.

The company leases about 257,000 square feet of space in Lake Forest after taking on more space in the area.

San Juan Capistrano-based Birtcher Anderson Realty LLC owns Western Digital’s Lake Forest campus, according to CoStar Group Inc. data.

The company’s monthly rent had run from about $1.35 per square foot to $1.76 per square foot in the life of the Lake Forest lease, according to filings with the Securities and Exchange Commission.

LBA Realty lists rental rates at other office space at Park Place at monthly rates of $2.15 per square feet.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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