Irvine Company has started to prepare for life after Broadcom Ltd., one tenant at a time.
The Newport Beach-based landlord recently began to actively market the space that the chipmaker leases in Irvine at University Research Park, the 36-building, 2.2-million-square-foot office campus it built and operates next to the University of California-Irvine.
Broadcom—the largest office tenant in Orange County—occupies space at 11 buildings at University Research Park. The mix of two-, three- and four-story offices total about 836,000 square feet and will be vacated and available for lease by June 2018, according to Irvine Co. marketing materials.
The return of space will be the largest hit to Orange County’s improving office market since multiple mortgage companies vacated numerous buildings here around the onset of the last recession.
Irvine Co. has announced plans for a multimillion-dollar redevelopment of the properties, with open-air gathering areas, new lobbies, and other tenant-friendly perks on the drawing board.
The Broadcom buildings will be offered for lease to multiple tenants, and the first occupant for a portion of the space has just been confirmed.
Toshiba America Inc. recently finalized a lease for 96,000 square feet at 5231 California Ave. and 5241 California Ave.
It’s the largest new office lease reported so far this year in Orange County.
Irvine Co. officials said last week that Broadcom has agreed to move out of the two buildings ahead of schedule, so that Toshiba can move in by October.
Louis Tomaselli and Steve Wagner, brokers with the Irvine office of brokerage JLL, represented Toshiba in the lease.
Tokyo-based Toshiba Corp.—whose Toshiba America unit makes a variety of electronic components, information systems and logistics products—announced plans to relocate its local operations last year following the sale of its main Irvine facility for about $65 million to Irvine-based LBA Realty.
Toshiba’s move got Irvine Co.’s plans to fill the Broadcom space off to an early start, according to Steve Case, executive vice president of the landlord’s office division.
“We weren’t anticipating (much deal-making) until Broadcom moves out, when we can show tenants our plans for the campus” and redevelopment work can begin, Case said.
Irvine Co. executives are hopeful they can strike some more deals over the course of this year; Case said they’ve has been talking to another out-of-town tenant about a multibuilding lease at University Research Park.
The undisclosed company is looking to set up shop close to UCI, Case said.
“It’s no coincidence that some of the nation’s top technology companies operate near the top research universities,” Case said.
“The innovation possibilities, the recruitment and retention of top talent and the unparalleled collaboration opportunities are among the reasons companies like Hewlett-Packard operate next to Stanford, Dell is headquartered at the University Texas-Austin and why Toshiba chose its new home next to UC Irvine,” he said.
Irvine Co. marketing materials describe University Research Park as a “vibrant hub of entrepreneurs and visionaries” due to its base of technology-related companies. Other tenants at the office park include Cisco, Intel, Skyworks Solutions and Teradyne.
In addition to traditional office tenants, the 185-acre campus also includes a handful of incubator programs, including The Cove, a 31,000-square-foot building that houses several startups and those serving them, such as venture capital firms, and The Vine, a building that holds co-working space for startups.
Big Impact
Broadcom is in the process of building a new campus for its operations at Great Park Neighborhoods in Irvine, about 10 miles from University Research Park. It announced plans for the new campus in late 2014.
The first phase of the development, at the former El Toro Marine base site, will be about 1.1 million square feet and is scheduled to open in phases starting around the end of the year.
It is unclear how much of the space now under construction will ultimately be occupied by Broadcom, which was acquired last year by Avago Technologies Ltd. in a $37 billion deal.
The Singapore-based company—which now has its U.S. headquarters in San Jose—has slashed local jobs in the wake of the deal and listed multiple buildings for sale at the Great Park site, along with land initially intended to hold a second phase of office development.
Broadcom’s forthcoming give-back of space at University Research Park—not to mention the potential vacant space at the company’s new campus—will have “a significant impact on the office market,” said Randall Parker, senior managing director at brokerage Savills Studley in Newport Beach.
Orange County’s office market has a vacancy rate approaching 10%, according to a survey of local brokerage data.
Vacancy rates in Irvine are even lower, at about 7.6%, according to data from CBRE Group Inc.
The Broadcom give-backs “will certainly affect URP, and it will also affect the airport area, as well as the office market in South County,” said Parker, one of the area’s most active tenant brokers.
Unless other large tenants are found to back-fill Broadcom’s old space, expect to see some softening in rents as a result of the give-back, particularly for the low-rise office market in and around Irvine, which is “really tight” right now, according to Parker.
Rents for space at other available buildings at University Research Park run about $2.25 per square foot, according to the website of Irvine Co.’s office division. Asking rents for Broadcom’s existing buildings haven’t been disclosed.
NextGen Features
Broadcom moved to the University Research Park campus in 2007, initially taking up space in eight newly built offices running 685,000 square feet.
It later expanded into a number of additional buildings there, and at one point occupied more than 900,000 square feet.
Case noted that Broadcom’s buildings were initially planned to be a developed as a multitenant campus, so it shouldn’t take too much work to renovate them for more than one occupant.
The goals with the planned upgrades are to bring the offices “up to the standards of our newer, NextGen campuses,” Case said.
Irvine Co.’s NextGen buildings include creative-office flourishes like outdoor workspace and other employee-friendly amenities, and are designed with modern architectural styles that include lots of natural lighting.
A similar project was undertaken the past couple of years at Irvine Co.’s Sand Canyon Business Center, which was initially developed as a multibuilding campus for Verizon Wireless but now is a multitenant project, noted Tom Greubel, vice president of leasing at Irvine Co.
A pair of new offices at the Sand Canyon Business Center, a few miles from the Irvine Spectrum shopping center, are close to opening, with tenants including Cavium Inc.—which bought Aliso Viejo’s QLogic Corp. last year—and upstart fintech firm AutoGravity.
