The question is who’s going to blink first?
Western Digital Corp. and the Irvine Co., two of Orange County’s most recognizable corporate titans, are locked in a negotiating battle over the disk-drive maker’s spacious office building in the Irvine Spectrum.
According to industry sources, the Irvine Co. has agreed to re-lease roughly half of the 15-story building near the Interstate 5 and Interstate 405 junction to Western Digital. The sticking point is the price.
Currently, Western Digital leases the entire 15-story, 366,000-square-foot structure, but because of a prolonged slump and cutbacks, Western Digital only utilizes roughly half of the building. With its lease expiring in January, the disk-drive maker has been seeking a new deal with the Irvine Co.
Sources say that about a month ago, the Irvine Co. presented what it characterized as a final offer to Western Digital officials, terms of which apparently were unsatisfactory. As a result Western Digital may soon be taking its moniker off of the 15-story building it calls home in favor of smaller digs in Lake Forest.
According to real estate sources, Western Digital now is looking to cut a deal with Birtcher Enterprises for space at the Newport Beach-based company’s 183,038-square-foot Serrano Creek office campus. Consisting of three two-story office buildings at 20411-20521 Lake Forest Drive, Serrano Creek office park has been completed and is available for lease.
Meanwhile, the Irvine Co. has begun marketing the entire 366,000-square-foot space currently occupied by Western Dig.
A Western Digital spokesman declined to comment specifically about the lease negotiations.
“At this point in time, the only thing we’re going to say publicly is that the lease in the current facility runs out at the end of January and we are actively exploring several different options,” said Bob Blair, a spokesman for Western Digital. “All of (those options) would include Western Digital’s worldwide headquarters staying in the same general area where it’s at now.”
Blair said staying in the Spectrum building also remains an option.
Sources say Western Digital, through its brokers at Daum Commercial Real Estate, has also looked at space at the Park Place office campus in Irvine and The Summit masterplanned project in Aliso Viejo.
The Irvine Co., meanwhile, is publicly expressing its desire to retain Western Digital.
“We’d still love to keep them and they know that, so if they are ultimately OK with the economics of staying, we’d love to have them there,” said Jennifer Smith, a spokeswoman for the Irvine Co.
“It’s not a matter of negotiations breaking down,” she said. “It’s them exploring other alternatives, and we have to do the same.”
Neither Irvine Co. or Western Digital officials would comment on lease terms or how far apart the two are. Nonetheless, the Irvine Co. has listed the Western Digital space with asking rates ranging from $2.75 to $3 per square foot. Birtcher’s Serrano Creek project is being marketed with an asking rate of $1.35 per square foot.
In 1997, Western Digital purchased 32 acres of land in the Irvine Spectrum from the Irvine Co., with plans to build an office campus for its headquarters. Since then, however, the company has been badly battered by a slump in the disk-drive business, laying off more than 6,000 employees worldwide, including roughly 400 in Irvine. Last year, the company resold the 32 Spectrum acres, still undeveloped, back to the Irvine Co.
The parrying between the two corporate giants is being watched closely by real estate brokers, most of whom expect Western Digital to stay where it is.
“What the Irvine Co. will do is find out what the bottom line is in the Birtcher building and say, ‘Okay, what’s it going to take to get you to stay?’ ” said one broker. “The guy that has the last card is the Irvine Co., and they won’t play that card until they absolutely have to.”
