Computer Slump Echoes in Empty Buildings : As Industry Suffers, So Does Demand for High-Tech Work Space in Valley

A year and a half ago, Microperipherals Inc. was renting 72,000 square feet in Chatsworth for its thriving disk-drive business, which had 400 employees. But that was before its market was invaded by cheap imports.

Now Microperipherals is being liquidated and its staff of 15 rattles around in 25,000 square feet--about seven times more than needed, the company president says.

The case of Microperipherals is extreme but not unique, and it aptly illustrates how the continuing slump in the computer industry hurts the San Fernando Valley real estate business. Poor sales and the movement of jobs overseas have reduced the demand for the office-industrial space often occupied by high-tech firms.

Particularly hard-hit are buildings specifically designed for high-tech tenants. With ample parking and lavish landscaping, these are being leased slowly, and for depressed rents.

“The high-tech market is very slow,” said Joe DiLullo, a leasing agent with TOLD Corp., which handles high-tech buildings as both developer and rental agent.

Rents Coming Down

Said Tim Foutz, a Grubb & Ellis leasing agent who specializes in high-tech rentals: “The rents on most buildings lately have come down a nickel or more per square foot per month.”

The computer doldrums are hurting industrial- and office-space leasing as well. Many high-tech companies had adapted conventional space to their needs, space they now need less of.

“A lot of non-high-tech space is now occupied by high-tech companies,” DiLullo noted.

The availability of well-appointed new space built specifically for the high-tech industry is drawing tenants from older buildings, further weakening the already glutted office market, real estate specialists say.

Ventura County Market

The market for high-tech space is particularly bad in Ventura County. In the Valley, landlords pushing high-tech buildings can go after a variety of tenants. But, to the west, such landlords are more dependent on computer companies, said John Montanaro, chief financial officer of Santa Monica-based Terra Development Corp.

Terra completed a $7-million high-tech building in Moorpark nearly a year ago and has yet to lease any of it. TOLD has several buildings aimed at high-tech tenants in Moorpark, Thousand Oaks, Newbury Park, and Camarillo, but is not building any more.

“We’ve gotten out of the high-tech market,” said Hank Urbach, TOLD’s marketing vice president. “We’ve got about 400,000 square feet of high-tech up and available, but we’ve since gone back to plain-Jane industrial buildings.”

Buildings intended for high-tech tenants usually combine some attributes of office and industrial space, and the tenants usually use them for both.

Unlike office buildings, high-tech buildings are usually away from major boulevards, where land is most expensive. Unlike industrial buildings, high-tech buildings tend to be fully air-conditioned and carpeted, on landscaped property.

Parking Difference

But the biggest difference of all is parking. High-tech buildings, aimed at tenants with labor-intensive businesses, usually have three to four parking spaces for every 1,000 square feet. A standard industrial building has perhaps two spaces for per 1,000 square feet.

Perhaps more typical than Microperipherals is the case of Computer Memories, also of Chatsworth.

Computer Memories is also in the highly competitive disk-drive business. Plagued by cheap imports and reduced demand for its products, the company has cut its work force in Chatsworth from 700 a year ago to 280 now, at the same time expanding its production in Singapore.

“That’s the place where we have our most efficient labor market,” company President Irwin Rubin said.

Besause of that, Rubin said, Computer Memories will shed up to a third of the 90,000 square feet of space it now occupies in five buildings on Eton Avenue. The company already is trying to sublease two of the buildings--both with features suiting it to high-tech tenants--totaling 24,000 square feet.

At 55 to 70 cents per square foot per month, a 30,000-square-foot reduction should save Computer Memories $198,000 to $252,000 a year.

But owners of high-tech buildings, usually designed to convey a sleek, campuslike appearance, don’t limit themselves to computer companies.

“High technology could be anybody in electronics, defense, communications, banking,” said Mel Goldstein, a Cushman & Wakefield leasing agent who handles high-tech buildings. He and other leasing agents also said they don’t mind renting high-tech space to non-high-technology users, as long as they can pay the rent.

“We’ve gone after the office user on Ventura Boulevard,” Goldstein said. Monthly rents for office space there are $2 to $2.50 per square foot, versus about $1 for space in more far-flung buildings aimed at technology companies, experts say.

High-Tech Discount

At 9401 Oakdale Ave. in Chatsworth, for example, a new, 100,000-square-foot building aimed at high-technology tenants was leased as office space to Great Western Financial Services Corp. for about $1 a square foot. Great Western already has sizable operations in nearby Northridge.

Leases come even cheaper for truly high-tech companies, because they usually use half their space for offices, whereas the other half is for assembly or manufacturing, which require less expensive interiors. The combination means prices in the 85-cent range, DiLullo said, with perhaps six months of free rent for a 10-year lease or, for highly desirable tenants, the gift of a small ownership interest in the building.

Some high-tech companies use conventional buildings with inadequate parking and make other arrangements for their employees’ vehicles. Tandon, for example, rented parking for a while at the nearby Winnetka Drive-In Theater, until recent layoffs made that unnecessary, a company spokesman said.

Despite the oversupply of high-tech space, there is one major project under way in Chatsworth, across the street from another that was recently finished. The projects are on Plummer Street near Canoga Avenue and together are putting more than 300,000 square feet of high-tech space on the market.

The one under construction, the $25-million Chatsworth Technology Center, will have four buildings with 250,000 square feet, according to Foutz, whose firm is acting as rental agent. He said the Cabot, Cabot & Forbes project is more than half leased, and that the 23-acre property has room for another 250,000 square feet to be added later.

The other project is called the Chatsworth Tech Center, built by the Terra organization. It is a $20-million, 11.5-acre project consisting of two buildings with a total of 52,000 square feet. It is not yet leased.