TOLD Cuts Jobs as Vacant Offices Make New Kind of Open Space
It was the open spaces that lured Jack Gilbert to Ventura County, where TOLD Corp., his Oxnard-based real estate company, started in the early 1970s building office parks in bean fields, then often watched other businesses stream into the area.
But people who watch the commercial real estate market in Ventura County these days have their minds on a different kind of open space: empty offices in the region, signaling a slowing demand for the space by area businesses.
Office vacancies in Ventura County reached 23% at the middle of this year, compared to 15% a year earlier, according to a survey by Grubb & Ellis, a real estate firm.
That’s bad news for TOLD, which grew to become one of the county’s biggest developers. Since the beginning of the year, the company has laid off more than a quarter of its Ventura County work force, reducing its employees from about 135 to 97. (The company also has employees and operations in Wisconsin, Minnesota and Washington state.)
Most of those layoffs were in TOLD’s construction division, where work has slowed to a trickle. It was only TOLD’s second round of layoffs since it was founded, but TOLD had many fewer employees in the earlier slowdown in 1981.
Another sign of hard times, Gilbert said, is that about 45 of the company’s 400 or so tenants are unable to pay their rent, compared to six a year ago.
Gilbert said TOLD won’t make a profit in the fiscal year that will end March 31 unless, as planned, it sells two of the buildings it owns. Revenues of real estate companies like TOLD can fluctuate dramatically, because the sale of a few buildings can bring in much more money in a day than renting the same buildings all year.
Gilbert said that, if it does sell the buildings, TOLD will probably be profitable, with about $65 million in revenues; if it does not, TOLD will probably show a loss on about $25 million to $30 million in revenues. Last year, TOLD showed a profit on $53 million in revenues, he said.
Despite the slowdown, Gilbert said, the vacancy rate is actually lower now than a year ago--18% compared to 30%--in its 3 million square feet of completed industrial and office buildings in Ventura County.
The main reason, he said, is that TOLD began last year to reduce its inventory of available industrial and commercial space (including buildings under construction) from about 1.2 million square feet 15 months ago to 400,000 square feet recently, mainly by slowing its rate of office construction and renting out what space it had.
TOLD President Pat Hall admitted that “we weren’t so bright” as to foresee a recession. “We just saw seven years of expansion” and decided to get ready for those days to end, Hall said.
Other developers in the area are also feeling the effects of the downturn. Russell Goodman, the Ventura County regional president of the Sammis Co., a nationwide commercial developer based in Irvine, said three office buildings it opened last November have been filling up slowly. But, Goodman said, “I don’t see any softening” in Sammis’ leasing and sales of industrial space.
Across Ventura County, one problem affecting all the developers was that a large amount of office space came on the market in April, May and June, according to a survey by Grubb & Ellis. One new building with 111,000 square feet came on the market when its owner, Chevron Corp., decided not to move in.
But the higher vacancy rate wasn’t all due to new space becoming available. Demand--as measured by the change in occupied space, or “net absorption”--was also sluggish. From the first to second quarters of this year, net absorption in Ventura County fell from 111,059 square feet to 26,665 square feet, Grubb & Ellis said.
Some aren’t so worried about the statistics. “I think it’s a blip in the market,” said Thad Seligman, a vice president and district manager for Grubb & Ellis in the county. Sammis’ Goodman agrees.
But Gilbert said that, for now, TOLD is a bit more pessimistic about the Ventura County commercial real estate market. “We believe we’re three to four months into a downturn that has five to six months to go,” he said.
In fact, looking for other real estate markets to invest in while Ventura County slows down, TOLD recently bought two buildings in Dallas--where the real estate market has suffered through a recession for most of the 1980s.
TOLD’s Craig L. Miller said the company paid less than half of what it would cost now to construct the two buildings--with a total of 287,000 square feet of office and industrial space.
Gilbert said that, if real estate values in Texas climb and TOLD’s gamble pays off, the company won’t be able to make similar deals endlessly. “This can’t go on forever,” Gilbert said.
