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Thursday, Sep 28, 2023

Prepping for the Real Return

Since acquiring its new headquarters facility in Irvine last September, property management firm RiverRock Real Estate Group Inc. has been investing time and money to create an office that’s future proof.
The company’s plan hinges on making an office that makes employees want to return after more than a year of largely working from home.

To do so, the company is looking at physical upgrades that have become commonplace in the past year—indoor/outdoor connectivity, new air filtration systems, touchless technology—and something less tangible.

“It’s the FOMO factor,” said Rick D’Amato, principal and workplace design director at Irvine-based LPA, referring to the acronym for “fear of missing out.”

“It was one thing when everyone was stuck at home, but as employees start to return to the office, others are likely to miss that in-person connection,” added D’Amato, whose architecture firm led the design of RiverRock’s new space.

D’Amato notes that its design business has picked up noticeably in recent months as “clients look to refresh their space and add new programs to give employees a reason to want to come back.”

Fitwel HQ 

RiverRock paid $7.5 million, or about $368 per square foot, for the office at 2392 Morse Ave. in September.

The 20,392-square-foot building fronting the San Diego (405) Freeway—the former home of master developer SunCal Cos.—is more than twice the company’s previous footprint at 100 Bayview in Newport Beach.

It has since invested “more than we should” in upgrades, notes RiverRock founder John Combs, with the company making targeted improvements in order to achieve Fitwel designation, a new industry standard originally created by the U.S. Centers for Disease Control (CDC) and U.S. General Services Administration.

“We’re building a space that’s not only safe, but gets our employees excited about returning,” said Combs, who started RiverRock in 2003 after leading the property services division of New York-based Insignia ESG.

The company ranks No. 7 among OC’s largest commercial property managers; RiverRock manages nearly 40 million square feet in and out of the area.

Fitwel requirements range from the standard—building access and density—to the more outlandish: “one of the requirements is to have an herb garden, so we’ve been meeting with an urban garden specialist who will also be available to meet with our staff that’s interested in learning more about gardening,” said Combs, who didn’t indicate whether he’ll be taking part in the gardening lessons.

RiverRock is targeting a June 14 move-in date, a day ahead of Gov. Gavin Newsom’s projected state reopening.

Phased Return 

After more than a year of a largely remote workforce and a few false starts, RiverRock is among many Orange County employers that’s prepping their staff, and their properties, for the real return to the office.

For now, that return has been flexible, with employers allowing for a slowed, phased employee return.

“We’re currently in the A-B plan,” in which half of the firm’s 50 employees is in the office on any given day, though returning to the office has been “entirely up to each employee,”  Combs said.

Though this flexibility will likely transition into something more concrete as California more fully reopens, it has prompted companies to rethink their space needs in the short term.

“The new amenity is allowing employees to be flexible with where they get their work done,” D’Amato said.  

For RiverRock, that means potentially leasing out part of its new hub to smaller companies as it manages a smaller in-person base.

Sublease Surge

Subletting has grown in popularity since the onset of the pandemic, as office tenants hit the pause button on making lease decisions.

Total office sublease availability is up about 30% year-over-year. In addition to sublets, 470,000 square feet of available office space in OC is expiring by the end of 2022, “potentially adding large blocks of space” to the market, according to brokerage JLL.

Companies that initially planned on listing their space for subletting in the past year may pull the listing as employers decide to return to the office, notes George Thomson, a senior managing director at Newmark.

Meanwhile, the current pool of available sublease space could be snapped up as tenants look for more flexible lease terms.

“Some of those deals will turn into longer-term leases,” Thomson said. 

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