Ernst & Young Opts for Decentralization
National accounting firm Ernst & Young has announced a plan to move its downtown headquarters and reconfigure its office sites in a way that will reduce employee commutes and put consultants closer to their clients. The upcoming changes in Southern California reflect a national trend by service companies to cut down on workers’ travel time.
The New York-based firm will discard the traditional “dominant central office” model in favor of smaller offices spread throughout the region.
The new system will be launched in the Los Angeles area, where Ernst & Young employs about 1,500 people, before it is implemented to varying degrees nationwide, said Pacific Southwest Area Manager James Freer and Area Human Resources Director Kevin Kelly.
Large accounting firms are leading the way as service companies around the country revise their office-use strategies in recognition that “the action is at the clients’ sites,” said Ed Friedrichs, Santa Monica-based president of Gensler, an international architectural firm.
And since such shared-facilities approaches use space that would otherwise sit empty while people are out in the field, “the net result is that the per-capita utilization of office space in service-based businesses is declining,” Friedrichs said.
In response to a two-year study that analyzed such factors as employee transportation and facility-use trends, Ernst & Young opened a large office in El Segundo near Los Angeles International Airport. It is also substantially expanding and relocating offices in Warner Center and Riverside and will relocate its large downtown Los Angeles operation a couple blocks south from Arco Plaza to slightly smaller offices totaling about 147,000 square feet at the newer high-rise now known as Citicorp Center.
The so-called constellation structure is intended to put partners and staff members closer to their clients and give them a choice of locations from which they can work as needs and convenience dictate, Kelly said. Another primary goal is to reduce staff commutes to 30 minutes or less.
The strategy includes designing similar layouts at each office, eliminating the traditional hierarchical floor plan that typically gives bigger, better-located private offices to senior executives. The new El Segundo office, for example, includes no corner offices--a perk many big producers and high-level executives have come to expect in corporate America.
Instead, employees can reserve small offices, basic workstations, various-sized conference rooms and other facilities as needed. Kelly said the firm’s audit and consulting associates in particular spend much of their time visiting clients and should benefit from having a choice of office locations they can visit.
The entire Citicorp Plaza mixed-use complex--including Ernst’s future downtown home at 725 S. Figueroa St., the adjacent office tower and the Seventh Market Place retail mall--will be renamed Ernst & Young LLP Plaza. Its former namesake “anchor” tenant, whose offices Ernst is taking over, relocated to what is now CitiBank Center at 444 S. Flower St.
E&Y; is the third “Big Five” accounting firm to plan a relocation to a late-vintage central business district high-rise within the last few months.
KPMG Peat Marwick will move from Citicorp tower up Bunker Hill, where its logo will replace IBM’s atop the 45-story high-rise at 355 S. Grand Ave. KPMG is downsizing its downtown offices even more than Ernst, taking five floors totaling about 123,000 square feet--roughly 60,000 feet less than it has been occupying at the 725 Figueroa building.
In sharp contrast, Deloitte & Touche will double the size of its downtown offices when it moves from 1000 Wilshire to as many as 13 floors (or about 340,000 square feet) being vacated by the Metropolitan Water District at the 52-story Two California Plaza high-rise atop Bunker Hill. Deloitte is consolidating its Los Angeles-area staff downtown and employing a new “drop-in center” strategy, maintaining small facilities in Century City, Woodland Hills, the LAX area and possibly other locations.
Ernst & Young recently opened its 57,000-square-foot airport-area office at the Pacific Corporate Towers in El Segundo. The expanded Warner Center office will soon relocate from 21300 Victory Blvd. to about 20,000 square feet at the Warner Center Plaza V tower at 21800 Oxnard St. The expanded Riverside office will also move from 3750 University to about 17,500 square feet at the Riverside Center, 3403 10th St.
In addition to smaller offices in Long Beach and Westlake Village, Ernst & Young also maintains a large Century City office--as does its E&Y;/Kenneth Leventhal real estate specialist affiliate. As leases expire in Century City and other locations around the country where both those groups maintain offices--including Orange County--the Ernst and Leventhal operations are likely to consolidate as they make new commitments, said Brian Ulf, Cushman Realty Corp. vice president who represents Ernst in its lease negotiations.
Ernst & Young plans to adapt the constellation approach within the rest of its four-state Southwest region before completing office-use plans for the balance of its U.S. network of offices, Kelly said.
Ernst engaged Buffalo, N.Y.-based BOSTI Associates to assist in the L.A. location study. Downtown L.A.-based Cushman Realty’s special-projects team, headed by Ulf and senior broker Ted Simpson, handled the bulk of the location search and lease negotiation responsibilities.
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Real Estate Trends
Downtown Los Angeles office Net Absorption (in millions of square feet)
Eight-quarter average: 0.01 million square feet
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Note: Net absorption reflects the gain in rented space. vacancy rate is the total vacant square footage divided by total rentable square footage in all existing buildings. Sublet space is space rented by primary tenants that is vacant and available for sublease.
Source: CoStar
