Sony, a Growing San Diego Tenant, Leases More Space

Bolstering its already sizable presence in the San Diego-Tijuana area, Japanese television manufacturer Sony has signed a lease-option agreement to occupy at least half of a vacant, 410,000-square-foot building in Kearny Mesa, Sony confirmed Wednesday.

Clint Michaelis, president of Sony Manufacturing Corp. of America, Sony’s Rancho Bernardo-based U.S. subsidiary, said his company signed a two-year lease for 200,000 square feet of the building on a 19-acre site at 4000 Ruffin Road. Sony also received a short-term option to lease the building’s remaining space. The site will be used as a warehouse.

Michaelis said Sony recently began assembling a new 32-inch line of color televisions at the Rancho Bernardo plant but said the lease was not prompted by a need for additional manufacturing space. Rather, Sony’s intent is to consolidate its far-flung storage of TV components and finished products under one roof, he added.

The building Sony leased was originally used by Sanyo E & E for refrigerator manufacturing. Sanyo vacated in March, 1987, after taking over new space on Otay Mesa and expanding its plant capacity in Tijuana.

Added to Sony’s 750,000-square-foot television plant in Rancho Bernardo, a 260,000-square-foot plant in Tijuana and a 111,000-square-foot warehouse on Otay Mesa, the latest lease boosts Sony’s status as one of San Diego’s largest non-defense tenants.

The building’s owner, California Structures of San Diego, expects Sony to make a decision in the next few weeks on whether to occupy the rest of the building. “The entire building is off the market,” California Structures partner Michael Murphy said Wednesday. Sony’s lease is one of San Diego’s largest this year, brokers said.

Michaelis said Sony’s rapid expansion had left it short of storage space. “We have been expanding our operations in San Diego over a period of time and as a result we have been taking warehouse space and converting it to manufacturing,” he said. Until recently, Sony was leasing 60,000 square feet of storage at the neighboring NCR plant in Rancho Bernardo.

The lack of warehouse space has forced Sony to store television sets and parts in truck trailers parked on streets adjoining the Rancho Bernardo plant, Michaelis said.

Sony now makes 95% of the sets that it sells in this country at its Rancho Bernardo and Tijuana plants. Sony’s 32-inch, 27-inch and most of its 20-inch models are made in Rancho Bernardo, and its 13-inch, 19-inch and some 20-inch sets are made in Tijuana. In addition, Sony also makes projection-style sets with screen widths of up to 45 inches at the Tijuana plant.

Sony, which accounts for about 6.5% of the 19 million TV sets sold in this country annually, employs about 1,700 in San Diego and 1,000 in Tijuana, Michaelis said. About 20 workers will be stationed at the Kearny Mesa plant.

Like many other Japanese consumer electronics companies over the past year or two, Sony moved TV production to Tijuana to take advantage of lower labor costs caused by the declining value of the peso versus the Japanese yen.

Storage space at Sony’s mammoth Rancho Bernardo plant also has been reduced by Sony’s decisions earlier this year to move production of work-station computers and 3.5-inch floppy disk drives destined for the U.S. market from Japan to Rancho Bernardo.

The 32-inch sets, the largest direct vision, or non-projection sets that Sony has ever made, will retail for about $3,000 when they reach the market in July, Sony spokesman Stephen Burke said Wednesday. The new TV model was announced to the U.S. market this spring and is already being sold in Japan, he said.

For now, the 32-inch model is being assembled in Rancho Bernardo from parts made in Japan. But component manufacturing may be transferred here if the model proves popular, Michaelis said Wednesday.

California Structures built Sanyo’s Otay Mesa plant in its San Diego Business Park development, then traded it and 38 surrounding acres plus cash last year to Sanyo in exchange for the Ruffin Road property, Murphy said.

California Structures is a partnership of Michael Murphy, Michael Strode, Dan Reid, Rich Wall and Ahmanson Commercial Development, the real estate arm of Los Angeles-based Ahmanson & Co., the parent of Home Savings of America.

In addition to owning the Kearny Mesa plant and the 74-acre San Diego Business Park in Otay Mesa, the partnership will begin work within 30 days on the 160-acre Brown Field Business Park, also in Otay Mesa.

Handling the Sony lease were Mike Smith, Joe Smith and Don Mitchell of Coldwell Banker commercial real estate brokerage in San Diego.