Chinese tech giant Tencent, one of the largest video game conglomerates in the world, is among the newest tenants at Discovery Park, a sprawling office park at the intersection of Sand Canyon Avenue and the Santa Ana (5) Freeway, having moved in earlier this year.
The deal reaffirms Irvine’s prominent, and growing, role in the gaming industry. The city is home to some of the most established video game firms in the world.
Notable names with operations in Irvine include game developers such as Blizzard Entertainment—long OC’s largest software company by employee count, with a local base now around 2,700—Obsidian Entertainment, Bandai Namco, and Amazon Game Studios.
Tencent can hold its own among those names. It currently owns a 40% stake in Cary, N.C.-based Epic Games, the maker of video game juggernaut Fortnite. Tencent also bought a majority stake in L.A.-based Riot Games, maker of League of Legends, in 2011
While Tencent opening a local office may be coming in “under the radar” for most people, still “it’s massive to have a company out of China come and plant its flag in Orange County,” said Scott Wetzel, executive vice president at commercial real estate brokerage firm JLL in Irvine.
“That’s the most noticeable one, that Tencent has planted a flag in Irvine,” Wetzel said of the gaming industry’s recent entry and hiring push in OC. The Chinese company’s reported to bring in nearly $20 billion in gaming revenue annually, and vies with Sony for the title of is the world’s largest gaming company by sales.
Tencent’s website currently lists numerous local job openings.
Boulevard of Dreams
The Tencent deal marks the latest indication that Irvine’s Sand Canyon Ave. has quickly become the local video game industry’s new hub.
Several notable names have struck office deals alongside the boulevard in the Spectrum area of the city, which isn’t far from the headquarters campus of gaming giant Blizzard, the maker of the World of Warcraft and Overwatch franchises. It’s a unit of Santa Monica’s Activision Blizzard (Nasdaq: ATVI), which is valued around $52 billion.
Startup Frost Giant Studios is one such firm.
Tim Morten, the chief executive of Frost Giant, said he looked for space for nine months before he settled on Innovation Office Park, the new Irvine Co. office development that opened its first phase earlier this year.
“We’ve been super happy here so far,” he told the Business Journal on Oct. 28, after a company move that took place over the summer.
Morton previously served as a production director for Blizzard, helping lead the company’s StarCraft franchise.
Frost Giant has reportedly raised nearly $10 million to date. It was the first tenant announced to date at the new office park.
“We’re hoping more game studios will take space here—our friends at Notorious Studios are situated upstairs, and at least four other game companies have been through on tours,” according to Morten.
Notorious is another recently formed company founded by a group of former Blizzard developers. It was reported last month that Riot Games invested in the new studio as part of a $5 million funding round for the company.
All the founding Notorious employees previously worked on World of Warcraft, according to reports.
Another upstart, Dreamhaven, a gaming studio founded last year by former Blizzard CEO Mike Morhaime and his wife, Amy, has its base at the nearby Sand Canyon Business Center, another Irvine Co. complex.
One reason for the rising ranks of upstart gaming companies: the fast-growing industry’s fortunes have only grown over the course of the pandemic, with its user base rising some 5% worldwide from 2019 to 2020, according to data from industry data provider Newzoo.
Nearly 35% of the world’s population play video games on one of more platforms, according to Newzoo’s data.
Pac-Man Fever
Innovation Office Park isn’t the only new office development along Sand Canyon Avenue getting attention of gaming companies.
Video game maker Bandai Namco Holdings USA has moved its North American base from Santa Clara to Irvine, after striking one of the area’s largest office deals of the year for a newly built office development.
The North American branch of the Japanese game maker, best-known for the arcade classic Pac-Man, is leasing the entirety of the Source H2O, a nearly 70,000-square-foot creative office project near the intersection of Sand Canyon Avenue and Waterworks Way.
The Source H2O is among the largest new area office developments not headed by Irvine Co. The Business Journal was first to report on the new lease in September.
JLL’s Wetzel represented Bandai Namco in the seven-year lease, whose monthly rent runs around $2.95 per square foot, according to CoStar Group Inc.’s records.
Fluctuating Needs
Office space needs for area video game companies often depend on the size and age of the company, Wetzel says.
“You’ve got Sega in down-and-dirty space. You have Blizzard—they have a nice main headquarters although it’s not really opulent,” he told the Business Journal on Oct. 28.
Blizzard has long been one of OC’s largest occupiers of office space, and currently leases more than 700,000 square feet at its expansive Irvine campus and other nearby buildings, according to regulatory filings.
“But then you look at Bandai, Tencent, Amazon and Microsoft—they’re all in really high-end space,” said Wetzel.
Wetzel said that Microsoft is “going for the nicest place in the market” at the Flight office campus just across the city line in Tustin. Microsoft acquired inXile to make role-playing games for Xbox and PC in 2018.
“When you have a really successful company and people are dedicated to the game, there’s less of a need for the shiniest new office space when it comes to recruiting, because you’re getting people who are almost idealistic interns of their dedication to the cause,” according to Wetzel.
“When you have a more run-of-the-mill game publisher and you’re maybe looking for independent contractors who maybe a going to come in and work on one game—maybe those folks do need a higher end space to be lured in.”
Esports Arena Move
It’s not just game developers that have been drawn to Sand Canyon Avenue of late.
The Esports Arena company moved to Irvine from Downtown Santa Ana in June.
Its new office at 14988 Sand Canyon Ave., currently serves as the company’s headquarters and broadcast facility.
“It’s an absolutely gorgeous facility. It’s the oldest building in Irvine,” said Esports Arena Chief Executive Tyler Endres.
“It’s super rustic on the outside but really cool and modern on the outside.”
The site, which sits alongside the 5 freeway, is on the opposite side of Sand Canyon Avenue as the entrance to Innovation Office Park.
Endres said that Esports took over the space from ad and marketing Gigasavvy.
Right now, Esports Arena, which numbers 25 in Irvine and has a close partnership with Irvine-based Allied Esports Inc., is looking for a new arena facility to open to the public.
“We are in talks and in search for a larger facility in the southern Orange County area most likely that will be back open to the public and hosting events again,” Endres said.
Endres says he’d like to open at the new arena for live events as early as the first quarter of 2022 but that is contingent on various factors, including the ability to contain COVID-19.
