Irvine Company Adjusts to Changed Real Estate Market
By DANIEL D. WILLIAMS
The Irvine Company is shifting strategy in a bid to weather the sluggish economy and rising vacancies.
The real estate bellwether said it plans to offer more executive suite-style space and is opting for shorter leases than it did just a few months back. The Irvine Co. also said it’s starting to work with tenants long before their leases are up.
Earlier this year, the Irvine Co. cut lease rates for some Irvine Spectrum buildings due to slackening demand. As of November, office vacancy rates in the Spectrum stood at 20.3%, up from 15.4% in June.
Bill Halford, president of The Irvine Company Office Properties, said it’s too soon to tell weather the market has hit bottom.
“I would like to tell you we have a clearer picture, but it’s not real clear,” Halford said. “We’re probably a quarter away from having a read on it.”
The Irvine Co. plans to offer more of its ReadyOffice suites, which are geared toward startups and smaller businesses, Halford said. The company now offers some ReadyOffice space at Newport Center and in the Spectrum.
ReadyOffice offers furnished space with kitchens and appliances. The offices are wired for phones and high-speed data service.
“We try to take out the complexity of negotiating rates and renting furniture,” Halford said. “We’ll even go down to (providing) silverware if need be.”
ReadyOffice tenants don’t share services with other tenants, as is the case in typical executive suites. Each office has its own entrance, office equipment and receptionist, if the tenant opts for one.
The Irvine Co. also plans to offer what it calls “spec suites”,pre-wired and carpeted offices that are unfurnished. The company has 48,000 square feet of new spec suites on two floors at 3 Park Plaza in Irvine’s Jamboree Center. The company said it has leased all but three spec suites.
At the same time, the Irvine Co. said it is being more open to shorter leases on its office and industrial space. In the past, the Irvine Co. locked in tenants for five- to seven-year deals.
“Customers are uncertain about the future,” Halford said. “Because of that, more and more tenants want short-term leases.”
The Irvine Co. also is getting involved with current tenants before their leases are up, in some cases moving them to other company properties. One such case: Coca-Cola Co.’s fountain division, which is relocating from Executive Park to 45,000 square feet in the higher profile 3 Park Plaza.
Another way the company is dealing with the real estate slowdown is through a beefed-up Web site,Irvineoffice.com. The online database catalogs the entire Irvine Co. portfolio and is updated daily, Halford said. The site also tracks space as it becomes available.
“If a broker needs, say, 5,000 square feet of space in the airport area and none is available at the time, the database will continue searching and send the broker an update when the space meeting his requirements comes online,” Halford said.
Other landlords are following the Irvine Co.’s lead, according to Barry Gail, director of the Irvine office of Cushman and Wakefield Inc.
“Landlords are being more proactive in efforts to keep cash flows moving in the right direction,” Gail said.
Landlord-tenant talks as early as 18 months before a lease is up aren’t uncommon these days, according to Gail. With the softer market, tenants want to lock in while rates are low, he said. But, with rising vacancies, there’s a plus for landlords too, he said.
“They don’t have to worry about impending vacancy,” Gail said.
