Office Space Getting More Down-to-Earth

From the upper floors of an Irvine high-rise, Bruce Hallett and his partners in the law firm Brobeck Phleger & Harrison layered themselves in old-line prestige. But their power suits, leather chairs and oak desks clashed with the bluejean-and-T-shirt culture of their high-tech clientele.

So Hallett made a bold decision. He moved the practice into a low-rise industrial building in the Irvine Spectrum, the heart of Southern California’s high-tech corridor. Suddenly, an open-neck collar replaced the firm’s button-down image. And Brobeck’s lawyers, who now greet clients in polo shirts and chinos, convey a message as different as the new surroundings.

“It’s not as imposing,” said Hallett, the Irvine managing partner of the San Francisco-based law firm. Or as expensive. Hallett will shave $3.2 million in rent and parking over the next decade.

Across the Southland, a growing number of businesses that once associated prestige with the tallest towers on urban skylines find themselves no longer wedded to signature buildings. Reflecting a shift in corporate mind-sets, some traditional high-rise tenants like Brobeck Phleger have begun relocating into smaller structures that were largely ignored in the past.

Other Southland companies making similar moves: Law firm Perkins Coie will shift from a Century City high-rise into Santa Monica’s Water Garden, a cluster of short office buildings. And E! Entertainment soon will leave a vertical monument in Los Angeles, where it occupies 15 floors, and settle into a luxury low-rise building next door.

“At any time, we typically have 100 people in elevators or waiting for elevators,” said Bill Keenan, the network’s chief financial officer, describing in an interview last year an essential reason for the company’s planned departure.

As the workplace turns less formal, employers are looking for office buildings that are as flat as their organizational structure.

“We’re seeing a greater acceptance of low-rise developments by a greater number of companies today than in the past,” said Richard Cannon, chairman of the Economic Development Corp. of Los Angeles County.

Indeed, such buildings have become the dominant form of office development in the Southland. In Los Angeles County, 6.9 million square feet of buildings of five stories or fewer were completed, under construction or proposed over the last two years. By comparison, only 3.7 million square feet of space in buildings six stories or taller were built or planned, according to CB Richard Ellis Inc., the nation’s largest real estate company.

In Orange County, nearly 11 million square feet of five-story-or-under buildings were being put up over the last two years. That compares with 3.5 million square feet of space in taller structures. Eventually, land costs will force developers to build taller, and more densely, analysts say. But for now, low-rise buildings are enjoying surging popularity. Irvine Co., the county’s largest developer, plans to erect another 170 low-rise buildings in its Spectrum business park in the coming years. It currently has 30 under construction.

As entertainment, technology and other fast-growing industries emerge as drivers of the regional economy, more companies are seeking expandable spaces found in horizontal buildings that offer large, flexible floor plans. An estimated 80% of Staubach Cos.’ clients consider smaller buildings when they’re looking for space, said Robert Chavez, president of the Los Angeles office of the Dallas-based leasing firm.

Campus-style, low-rise buildings carry such wide appeal that they give employers an edge in a tight labor market, analysts said. As the workday stretches well beyond 9 to 5, they’re easy to access around the clock. The offices can also be structured to allow teams of employees to work together. Often, the buildings are closer to where workers live, requiring a shorter commute.

In Orange County, the suddenly resurgent real estate market has been boosted by low-rise offices, or flex buildings, structures that can be used for offices or industrial needs. Some research firms may change the way statistics are kept, combining rather than separating some building types.

While office lease rates have jumped to their highest point ever, $2.03 per square foot in the second quarter, the first two high-rise buildings in 10 years are due to be completed by December, according to Grubb & Ellis Inc. But partly because large numbers of companies are relocating into shorter buildings, lease rates haven’t gone even higher.

Moreover, companies leased 835,000 square feet less than they did a year ago in Orange County, roughly the equivalent of a 33-story tower. That decline has caused the vacancy rate to edge higher to 9.3%, Grubb & Ellis said.

To be sure, many executives still prefer a traditional address. Ernst & Young announced in June a plan to merge its Orange County offices under one roof next year, occupying most of a 10-story Irvine building. When considering other sites, the firm’s low-rise choice advanced to the semifinal round. But company officials said being contained in one building would improve efficiency.

“If we looked at both alternatives, you can be sure many other tenants are doing the same thing,” said Stephen Duffy, who heads the real estate accounting subsidiary, E&Y; Kenneth Leventhal Real Estate Group in Newport Beach. “The high-rise owners are feeling the competition from quality low-rise office buildings that exist in the marketplace. No doubt about it.”

Brobeck’s new office--where some of Orange County’s biggest Internet-related companies are advised--stands in stark contrast to others in the legal field.

A limestone and quartzite stairway highlights an open-floor design that makes two floors seem like one. Tan, copper and arrowroot have replaced black, mahogany and gray as the dominant colors. Walls are adorned with bold strokes of artwork.

The new dress code and the move have proved popular among clients.

Scott Purcell, president of Irvine-based Www.com and one of Brobeck’s clients, used to tease the firm’s lawyers about their designer suits. Seeing them in casual wear makes them part of a “more real and attractive firm,” he said.

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Office Building Cultures

LOW-RISE

(5 stories or lower)

* Horizontal structure reflects a flatter hierarchy. Easier to collaborate when all workers are on same floor.

* Space is more flexible, easier to reconfigure.

* Elevator rarely needed--allows direct access to company.

* Leases run about 15% to 25% cheaper.

*

HIGH-RISE

(10 stories or higher)

* Traditional building follows traditional corporate structure -- CEO on top floor, workers below.

* Floor plan restricted.

* Elevator required to reach company--acts as barrier.

* Usually requires a subsidized parking garage.

* Leases run about 15% to 25% higher.