FUJITA: Leasing Is Slow in Encino Building Where the Unusual Is Commonplace

To some, the angular, white Fujita building on Ventura Boulevard in Encino is an eyesore. To others, it’s the kind of distinctive architecture that is rare in the San Fernando Valley.

But to its owner, the giant Fujita construction company of Tokyo, and to its leasing agent, the firm of Julien J. Studley, the real question is whether the building is a big white elephant.

The Fujita building is now easily the largest single block of vacant office space in the Valley. Completed in January, it is still just 10% to 15% leased, which is regarded as slow even when Valley office space is in such generous supply that 12 to 24 months is usually required to lease up a building these days.

“When a building is finished and ready, you like to see 20% leased,” said John Battle, a vice president at Beitler & Associates, a Sherman Oaks real estate firm.

The Fujita structure at 15821 Ventura Blvd. is first-class office space in a prime location. It fills the entire north block on the boulevard between Gloria and Densmore avenues, not far from the San Diego and Ventura freeways.

Yet, despite its location and striking appearance, some Valley real estate agents say the building is liable to remain largely empty for a good while.

Its unusual shape produces offices that are the wrong size and shape for the lawyers and accountants who are its logical market, and who require many small offices with windows, many observers say.

Encino Terrace Center, as the Fujita building is known formally, is partly a creature of a city-imposed restriction that, until October, limited new construction on Ventura Boulevard in Encino to six stories.

So the Fujita building has six stories, but that doesn’t mean it is small. It contains 400,000 square feet, more than the nearby 21-story American Savings & Loan tower on the southeast corner of Ventura and Sepulveda boulevards.

In large part because of the Fujita building, which met the old regulations, the limits were tightened to three stories, said Cindy Miscikowski, chief deputy to Councilman Marvin Braude, whose district includes Encino. New limits on square footage also were established.

The Fujita building’s bulk is apparently both a point of controversy and a factor in its slow leasing. The building makes up for its lack of height with a length of 575 feet, or nearly two football fields, and has a maximum depth of about 135 feet.

Those dimensions yield enormous floors of 60,000 to 80,000 square feet--four times the 15,000 or 20,000 square feet considered standard. As a result, tenant identification, that feeling of prominence a relatively small tenant can gain with half of a 15,000-square-foot floor, becomes elusive, according to some leasing agents.

Also, because the building is so deep--the distance from corridor to window is extremely wide on the lower floors--much of it is best suited for companies that want large, open spaces but don’t need many windows.

“Physical characteristics like that make the building more difficult to lease,” said Bruce Kusada, a leasing agent with the Charles Dunn Co. in Encino. Kusada placed a regional marketing unit of Coca-Cola in the building, which apparently impressed Coke with its amenities, such as the planned shops and restaurants.

Studley insists there is plenty of space suitable for small tenants, and downplays the difficulties of leasing the Fujita building. Seth Dudley, vice president in charge of the company’s Valley office, said he is now negotiating leases on about two floors of space to a variety of large and small tenants.

The Fujita building has stirred debate from the beginning. Those who live behind the building now say their homes are unlivable because of the way the structure shadows them and provides clear views into their backyards.

The building is also controversial architecturally.

“From a planning standpoint, I think it’s a disaster,” said Santa Monica architect Herbert Nadel. “From an aesthetic standpoint, the building itself is outstanding.”

On the other hand, he termed the structure’s bulk overwhelming, and said the size and the wall of plantings in front make it “an unfriendly building.”

Built on a former supermarket site, the Fujita building reportedly cost $35 million, not counting land-acquisition expenses, which were not disclosed. It was designed by architect Tony Lumsden of Daniel, Mann, Johnson & Mendenhall in Los Angeles.

Lumsden said in an interview that it represented an effort to create an interesting structure using modern forms while meeting the city requirements and maximizing rentable space.

He dismissed critics who say the floors are too big, contending that such criticism is born of the greater familiarity of some leasing agents with high-rises.

Prefers Low Look

Lumsden said he favors lower buildings because they create a more human scale and can generate pedestrian activity. He hopes the Fujita building will do just that, he said, through its pedestrian plaza in front of a series of shop fronts. The building also has outdoor seating areas.

The challenge of leasing the Fujita building rests with Studley, a national realty firm that has itself rented offices in the new building.

Dudley, a 30-year-old commercial realty specialist who studied English at Berkeley, said the firm has four brokers working full time on the project. He wouldn’t disclose Studley’s commission arrangement, but acknowledged that it is traditional inasmuch as Studley doesn’t get paid unless leases are signed.

In that sense there is risk for the firm, although the risk is offset by the leasing fees of $2 million or more that such a big building can generate. These fees must be split with tenants’ brokers, but prospective tenants are likely to have brokers only about half the time, said one knowledgeable rental agent.

Studley’s reputation is also jeopardized if it cannot lease a building, but other commercial real estate specialists said that the nature of this building and the market it must compete in are probably sufficiently understood to prevent such a stigma.

According to the real estate firm of Grubb & Ellis, the Encino-Sherman Oaks-Van Nuys area had an office vacancy rate of 18% as of June 30, up from 8% the previous year. The vacancy rate for Greater Los Angeles was also 18%, Grubb & Ellis said.

Dudley said asking rents in the building are from $2 to $2.25 per month per square foot, including taxes and utilities.

Incentives Necessary

But, like all leasing agents, he must give incentives to a desirable tenant for a long-term lease. These can include several months of free rent and improvements to the office space, such as fancy doors and carpets.

Real estate agents in the Valley said the Fujita rents are not out of line for top-drawer office space on Ventura Boulevard. They said, however, that although Fujita and Studley are willing to negotiate, they are not as anxious to rent as some competitors that are giving away more.

According to Dudley, that’s because Fujita can afford to wait the market out. Dudley and other real estate agents note that little first-class space is scheduled to be completed in 1987, and they expect a landlord’s market then.

Meanwhile, Dudley emphasizes the building’s posh corridors, its many terraces, and the shops and restaurants that will eventually occupy the ground floor. The corridors and lobby, for example, are finished in red, marble-like granite, with tiled floors and brass inlays. So are the lavatories.

Even the parking lot has a finished ceiling, and the elevators are gleaming stainless steel and brass, with red granite floors.

The building has a half-acre plaza sheltered from Ventura Boulevard by trees, and the second through fifth floors have a total of 20,000 square feet of terraces, each 15 feet wide.

But Studley is one of just five firms that have rented office space. The others are the Coke unit, the De Laurentiis Entertainment Group, the small law firm of Baltaxe & Rutkin and the small investment banking firm of Harmet & Associates.

The retail space is empty except for a part occupied by a Security Pacific Bank branch.

In the short term, the building faces competition from First Financial Plaza, a new office building at the southeast corner of Ventura and Balboa boulevards that opened in May and has already leased half its 216,000 square feet, according to a building spokeswoman.

Kusada said the owners of that building, First Financial Group, headed by Encino developer Jack Shine, are offering cheaper deals.

“We got a slightly better deal at First Financial,” he said. “But Coke preferred Fujita.”