Layton-Belling Takes Cue From South County in Marketing Cypress Campus
Layton-Belling Associates is trying to bring a little of South Orange County to the northwest of OC. The Newport Beach-based real estate development company is working to reposition the Cypress Technology Center in Cypress. The company is redeveloping and marketing the property as a campus-style office complex, like those common across Irvine, Aliso Viejo and other South County cities. While some campuses exist in North County, most are found farther south, where land is more plentiful. But Layton-Belling officials believe the Cypress market is ripe for such a project. “The whole Cypress market is extremely tight,” said Phil Belling, a principal with Layton-Belling. “Part of our repositioning effort is redoing the whole masterplan and incorporating it into a campus.”
‘On Fire’
Pat Remolacio, the senior vice president of Colliers-Seeley who has worked in the Cypress area for 12 years, said he believes timing could be in Layton-Belling’s favor. “The Cypress market has two modes: off and on,” he said. “When it’s off, it’s very quiet. When it’s on, it’s on fire. It happens to be on fire right now.” Based on numbers from CB Richard Ellis, Remolacio may be right. While South OC long has been an area of choice for relocating companies, Cypress has quietly established itself as an attractive location in northwest OC.
The area includes 14 office buildings totaling 1.1 million square feet. In the second quarter, the area’s vacancy rate was 10.2%, down from 18% in the second quarter of last year. Moreover, the area’s office market has posted steady absorption, with 110,000 square feet having been occupied this year through the second quarter. “We see a lot of migration out of the South Bay by Pacific Rim companies that want a corporate business environment and are tired of the lack of that quality in some of the South Bay,” Remolacio said.
A Half-Million Square Feet
The Cypress Technology Center, at the corner of Katella Avenue and Walker Street, totals nearly 500,000 square feet and includes an adjacent land parcel that can house, at the minimum, a 100,000-square-foot building. Already, the area boasts a list of top companies including Japan’s Mitsubishi Electric Corp., Arthur Andersen, Sony Corp. and PacifiCare Health Systems Inc. In a joint venture with Boston-based real estate investment adviser AEW Capital Management LP, Layton-Belling acquired the Cypress complex as part of its $160 million buy of Shuwa Investment Co.’s 1.4-million-square-foot OC office portfolio. The deal was completed in September 1999 and was the biggest that year. As part of the deal, Layton-Belling acquired office buildings in Newport Beach and Irvine as well. The Cypress portion included:
n An existing five-story, 150,023-square-foot building 100% leased by Mitsubishi Electronics America Inc.
n An adjacent 338,000-square-foot building that can be used for research and development, office and industrial space. Formerly 100% occupied by Mitsubishi, that building is now 50% vacant, a result of a restructuring by Mitsubishi.
n An 8.6-acre parcel of land where plans call for construction of a 100,000-square-foot-plus building.
Layton-Belling is investing an additional $3 million to reposition the entire complex. “What we’re doing is a major rehab of existing buildings and upgrading the industrial components to an office use, which includes putting in a new facade, windows and other new building systems,” Belling said. As part of the effort, Layton-Belling is looking to reconfigure the portion of the 388,000-square-foot building not occupied by Mitsubishi.
“We’re re-intensifying the (potential) uses and taking the remaining space,which was part office and part industrial,and converting it all to office,” he said.
Mitsubishi Will Shrink
But Layton-Belling has its work cut out. Mitsubishi has plans to consolidate its operations in the five-story building into two floors, with the remaining three floors to be subleased. Belling said he was aware of Mitsubishi’s plans and does not believe it will be an issue, given the low vacancy in Cypress. The goal, Belling said, given the location’s proximity to the San Diego (405) and the San Gabriel (605) freeways, will be to attract a major corporate office user that would require a large parking capability.
Separately, Layton-Belling has acquired a 3-acre parcel adjacent to the 8.6-acre property it already owns, to be used for additional parking for the building planned there. In designing this building, Layton-Belling officials apparently skirted what could have become a major issue: a water drain essentially splits the 8.6-acre parcel in two. Current plans call for construction of the building on one side, with the remaining side being combined with the three-acre parcel Layton-Belling acquired to serve as an expanded parking lot. “The plan would be either to park on it or relocate the water line,” Belling said. When completed, the entire complex will feature a series of low- and mid-rise buildings that can offer five parking spaces per 1,000 square feet of occupied space, higher than the average four per 1,000 many office buildings feature.
And the building’s wired. “The property also has fiber optics, which makes it attractive to some of the tech tenants,” Belling said. “Suddenly we’re targeting technology, administrative and data centers because of the large parking (availability) we can accommodate.” That, coupled with an asking rate of roughly $1.85 per square foot, will give Cypress the advantage it needs to be able to compete with the glitzier areas of the Irvine Spectrum and other South OC locations, Belling said. If Layton-Belling’s bet pays off,industry observers are for the most part optimistic,it could draw even more interest to the Cypress market, which attracted many companies in the 1980s, suffered during the recession and now seems to have bounced back. n
