El Segundo gets a second act as a trendy office destination
The most archetypal American small town in Los Angeles County may be El Segundo, with its neighborly mid-century vibe.
Visitors arriving on Main Street pass stately brick-and-stone El Segundo High School, a popular filming location, before encountering a large wooden directory erected by the Kiwanis Club that lists the city’s 11 churches.
Around the corner at Wendy’s Place Cafe, there are framed jigsaw puzzles of Saturday Evening Post covers drawn by Norman Rockwell hanging on the paneled wall above the milkshake machine. Locals greet one another over breakfast and lunch before the family-owned place closes in the afternoon.
The high-rise office district a few blocks away is a bracing contrast, seemingly decades ahead in time and picking up speed.
El Segundo was formerly known as an aerospace hub in the shadow of Los Angeles International Airport and a refinery town — its name derives from the 1911 selection of the spot by Standard Oil Co. of California for the company’s second oil refinery.
But recently the city has begun to attract a variety of creative businesses that might once have looked down their noses at the humble burg of 17,000 residents.
“There used to be a stigma that you didn’t want an El Segundo mailing address on your letterhead,” said real estate broker Steve Solomon of Jones Lang LaSalle.
Those days are clearly over for many high-flying companies. Last year, Time Warner Cable Inc. agreed to rent 60,000 square feet of renovated 1960s aerospace buildings there that were previously intended to house architect Frank Gehry’s firm.
Gehry’s plans changed in the sour economy, but Time Warner Cable is growing and widely expected to house its new sports station broadcast studios in the Alaska Avenue offices. The Los Angeles Lakers and Kings already train in El Segundo, and the Clippers work out in nearby Playa Vista.
In November, satellite broadcaster DirecTV Group Inc. agreed to double the size of its El Segundo headquarters in a lease valued at more than $300 million. DirecTV’s commitment is attracting other businesses that want be near the broadcast giant, Solomon said.
Other companies headquartered there include toy maker Mattel Inc., grocer Fresh & Easy and entertainment firm Rhythm & Hues. The largest employer is Waltham, Mass.-based defense contractor Raytheon Co.
Part of El Segundo’s appeal is economic. Rents there are substantially cheaper than they are in popular Westside markets, and traditional companies focused on the bottom line have found their way south through the years. Now businesses with an artistic bent are joining them.
“El Segundo is the creative alternative to Santa Monica,” Solomon said.
Ad agency David & Goliath fled the plush environs of Wilshire Boulevard and Barrington Avenue in part to get away from other ad agencies, founder David Angelo said. Among the firm’s television ads are Kia Motors’ rapping hamsters and a robot that tries to eat a Carl’s Jr. burger.
“If you are a challenging brand with a different point of view, it behooves you to reflect that,” Angelo said. “The last thing we are going to do is move into a corporate-type building filled with traditional companies. That wouldn’t be great environmentally for our people nor a good reflection of our philosophy.”
The fact that El Segundo is near LAX is also a plus for Angelo and others who travel frequently on business.
Angelo commutes from his home in Encino, but other executives like El Segundo because it is next to fashionable Manhattan Beach, where home prices can rival those of Beverly Hills.
Also providing a lift is Raleigh Studios Manhattan Beach, just across Rosecrans Avenue from El Segundo, where the two sequels to James Cameron’s 2009 hit movie “Avatar” will be made.
“All of a sudden, this is a very hip place to be,” said Robert E. Tarnofsky, director of real estate for Continental Development Corp., El Segundo’s biggest office landlord.
The hip factor was a long time coming, he acknowledged. Continental Development has an aerospace background dating to the 1950s and now owns more than 3 million square feet of commercial space in El Segundo.
In the 1990s, however, the company’s Continental Park offices were on the wrong end of the “peace dividend” that came with the end of the Cold War.
“Seventy percent of our tenants were in aerospace, and they just disappeared,” Tarnofsky said. “For survival, we were faced with the need to remake ourselves.”
El Segundo had the potential to be a good suburban office market, Continental concluded, but lacked a key amenity — diversions that workers could walk to, such as restaurants, stores and entertainment. Continental helped remedy that with new development, and the office district of El Segundo is now home to well-known brands, including Whole Foods, Best Buy and ArcLight cinemas.
The recent recession also took its toll on the offices, however.
“Two or three years ago, rents were falling and falling pretty dramatically,” Tarnofsky said. “We have seen the bottom and are now on an upswing.”
Office vacancy in El Segundo is still high at just under 20%, according to Cushman & Wakefield, but down slightly from a year earlier. Average asking rent ticked up a penny to $2.34 a square foot per month.
City officials are trying to attract more creative companies to town by broadening the type of uses allowed in an old industrial district known as Smokey Hollow that serves as a buffer between the historic downtown and the refinery owned by Chevron Corp., Standard Oil’s successor.
“We were getting creative industries and office users who like funky industrial buildings,” said Greg Carpenter, El Segundo’s director of planning and building safety.
The city also tries to woo companies with lower business taxes and fewer regulations, Carpenter said. “We are pro business and pro development.”
Although change has come fairly rapidly to the office district, the downtown founded in the early 20th century moves at an altogether different pace, said real estate agent Bill Ruane of Re/Max. “There’s very little turnover” in businesses, he said.
Ruane attributes that to generations of families that have stayed in El Segundo. The average local homeowner keeps the same house for 25 or 30 years, compared with an average of five years in Manhattan Beach, he said.
The longtime resident remembers when critics derided his town as “Smell Segundo” because of fumes wafting from the adjacent Hyperion sewage treatment plant. “It’s dramatically better now,” Ruane said, and quieter airplanes that came out in the 1990s have reduced airport noise.
He predicts that Smokey Hollow will catch on with visitors as well as creative businesses. Among the coming attractions is a sprawling new beer garden. Former Rolling Stones and Grateful Dead tour manager Dave Furano and restaurateur Michael Zislis are expanding their Rock & Brews venue in El Segundo.
“It’s becoming Venice,” Ruane said, “without the traffic or negativity.”