101 Corridor Yet to Feel Sting of Tech Meltdown
Months of body blows to the dot-com sector and other downward pressures on the technology sector have yet to humble landlords who cater to tech firms along a stretch of the Ventura Freeway where Los Angeles and Ventura counties meet.
Large companies are still searching for empty space in the 30-mile cluster of communities--including Camarillo, Thousand Oaks, Westlake Village, Agoura Hills and Calabasas--known collectively as the 101 Technology Corridor.
“The 101 Corridor is probably the strongest of the technology pockets we have in Southern California right now,” said economist Mark Schniepp, “and it certainly doesn’t show any signs of weakness.”
Schniepp, director of the Santa Barbara-based California Economic Forecast Project, is frequently asked whether the end is near for this particular real estate boom. Office rents in the area climbed 34% in the last five years and vacancy stayed below 10% even though several new buildings opened.
“There are a lot of fears out there about technology,” Schniepp said, but the much talked-about downturn has yet to trouble the 101 Corridor.
The region’s prospects are of concern to landlords and developers who are investing heavily in office and industrial projects, said Jack Hileman. His Los Angeles-based Hileman Co. began construction in January on the first of three buildings at its 275,000-square-foot, $40-million Arbors technology campus along the freeway near Wendy Drive in Thousand Oaks.
Hileman’s 16-acre project is a redevelopment of a former Teledyne Electronics site that has been largely vacant for more than 10 years. Besides about 215,000 square feet of new buildings, it includes an existing 60,000-square-foot building that is leased to microchip manufacturer Conexant Systems, a company that reflects the transformation of the 101 Corridor’s business community. “Conexant is an unfamiliar name to a lot of people,” Hileman said, “but it used to be Rockwell, which spun it off in 1998.”
Since then, Conexant has grown from 150 to 600 employees, mirroring the transformation of the 101 Corridor from an aerospace and defense-oriented region into a center for more than 600 technology and telecom companies employing 115,000 workers.
Hileman hasn’t signed any tenants for the new Arbors building that’s due to be completed in August, but he said he’s upbeat about leasing prospects because of the corridor’s continued growth. He also cited a September 2000 Deloitte & Touche report that 19 of the 50 fastest-growing companies in Los Angeles are located in the 101 Technology Corridor.
“We like the market because we think there is still a lot of activity there in spite of the talk about a downturn,” Hileman said. Businesses are looking for space in the area, he said, include phone company Verizon, voice and data network manufacturer Alcatel, biotechnology company Amgen and pharmaceutical firm Baxter Industries.
Other developers are finding tenants even before construction on their buildings is finished. Among them is Investment Development Services of Los Angeles, which is nearing completion on Westlake North Business Park, a $50-million, 327,000-square-foot campus of three office buildings on Russell Ranch Road near Lindero Canyon Road that IDS is developing in partnership with Kennedy Associates Real Estate Counsel.
Westlake North already is 56% leased, said David Saeta, a principal at IDS, which also is developing the 100-acre Conejo Spectrum business park at a former Northrop Grumman Corp. site at Rancho Conejo Boulevard and Lawrence Drive in Newbury Park.
The Spectrum includes about 500,000 square feet of existing buildings that IDS has renovated, plus 200,000 square feet of new space under construction and about 250,000 square feet planned after that, said Dave Mgrublian, managing director at IDS.
The 101 Corridor also has a fair share of traditional non-tech firms.
“The technology companies are going there for the same reasons as the Fortune 500 companies: good schools, low crime and good housing,” Mgrublian said. He pointed out that the corridor didn’t attract many dot-com firms, so it hasn’t suffered from a dot-com exodus during the industry shakeout.
Much of the new construction in recent years has been “research and development” space, which is developer terminology for single-story buildings that can serve either as traditional offices, research laboratories or industrial assembly facilities.
“Our industrial base here is not the heavy manufacturing or big warehouses you see in some industrial areas,” Mgrublian explained. “It’s more like research labs and light assembly.”
In addition to the suburban amenities, companies leasing office and industrial space in the corridor are attracted by the area’s deep and diverse labor pool, said John DeGrinis, a Colliers Seeley International broker who specializes in Conejo Valley properties. The labor pool includes many former defense industry engineers and technicians who have transferred their skills to new technology companies.
Though he’s optimistic about the long-term prospects for the 101 Corridor, DeGrinis believes that the office market there could encounter “a blip” in the near term. Just under 10% of the corridor’s 4 million square feet of office space is empty, a sign of a strong market, DeGrinis said, but that vacancy rate “could rise significantly” because 750,000 square feet of new space is under construction and the pace of leasing has slowed this year.
But office leasing last year was “feverish,” DeGrinis said, so this year’s level of activity is still reasonable by historical standards. Also, relatively little land is available for new commercial developments after the current crop of buildings is completed, so the market is likely to tighten again even if it does soften.
