SHELLY GARCIA Staff Reporter The dozen bidders who recently bellied up to the table for the 35-acre Prudential Insurance Co. of America property in Warner Center weren’t just interested in the neighborhood. Granted, Warner Center is one of the Valley’s top office markets, but these would-be buyers were more attracted by the three-story, campus-style design of the complex as well as the ability to construct additional low-rise buildings on the land. Prudential ultimately chose a bid from Lennar Corp., a Miami-based real estate company now conducting due diligence on the property. But interest in low-rise properties is occurring throughout the San Fernando Valley. “Apples for apples, if you had a brand-new, quality high-rise and a low-rise building, what’s going to lease first is the three-story building,” said Ric Kern, senior vice president at Voit Cos. Woodland Hills-based Voit is partnering with Lennar on the Prudential project, but Kern’s observations can’t be shrugged off as mere salesmanship. Four other developers are currently hoping to take advantage of the increased interest in and decreased availability of low-rise office space in the Valley. J.H. Snyder Co. is building a 600,000-square-foot, campus-style office development on five acres in Burbank. Kilroy Industries will begin construction of an 18-acre, low-rise office park in Calabasas this summer. Regent Properties is due to complete the first of five low-rise office buildings in West Hills this fall. And in Woodland Hills, Katell Properties will break ground on two six-story buildings the developer is calling “mid-rise” next year. “Certainly, all these people are concluding that low-rise is what tenants are looking for,” said Katell President Gerald Katell. The trend toward low-rise offices began when entertainment companies started seeking more casual environments where employees could stroll and mingle along the grounds. But now, companies from a range of different industries have followed suit. Developers say low-rise spaces appeal to insurance companies that need to accommodate row upon row of desks for claims processors; technology-based companies that want to encourage their research-and-development staff to network and share ideas; and data processing and telemarketing companies, among others. Most low-rise complexes also offer free parking, a cost savings to companies that pay employees’ parking costs and a recruiting tool for those that don’t. Low-rise buildings also can be more cost efficient for large companies, as they eliminate the need to duplicate conference rooms, lunch areas and other support services like copy and storage rooms on different floors. Despite such features, developers and brokers are split on whether low-rise developments are attractive enough to lure companies away from their traditional homes just to get a campus-style facility. Entertainment companies, for example, have shown little willingness to vacate their digs in Burbank and Glendale, said Donald W. Hudson, senior vice president and director of leasing for Warner Center. “Disney, Warner and Turner all took space in Glendale high-rises,” when they needed to expand beyond their main buildings, Hudson said. That’s an encouraging sign to PacTen Partners, which is developing a high-rise, 24-story office building at the 134 Freeway and Central Avenue in Glendale, where the land available will not accommodate a low-rise facility. PacTen says it has had a lot of activity on the property and is currently negotiating leases, though none have yet been signed. “I think there’s a place for both (high- and low-rise buildings) in Southern California, but to build campus-style offices in a densely populated area is very difficult to do,” said Nyal Leslie, a partner with PacTen. “Everyone who says they want a campus-style building isn’t going to get it.” Indeed, despite the experience of East Valley entertainment firms, many developers and brokers remain convinced that as more low-rise facilities become available, enough firms will opt to abandon their high-rise digs, even if it means traveling farther west into the Valley. “Will people move out to outlying areas in order to get space in these low-rise centers? There’s no question about it,” said Keith Green, associate vice president at The Seeley Co. in Encino. Of the low-rise office developments underway, only the Burbank Media Center is centrally located. That is because there is little land available in the densely populated East Valley, and what land exists does not come cheap. “There’s a financial break point where it makes no sense to buy more land,” said Cliff Goldstein, a partner with Snyder. Snyder had to renegotiate the entitlements the previous owner held on the Burbank property in order to build the low-rise office center, but with the market getting stronger, company officials figure they made the right decision. “You have to ask yourself, at what point is too much space on a speculative basis too much?” Goldstein said. “I think 600,000 square feet is the right amount of space, although as every month goes by (and the market continues to improve), I think maybe we should have built more.” Most developers are moving farther west into the Valley to take advantage of the interest in low-rise developments. Douglas S. Brown, managing partner for Regent, which is constructing West Hills Corporate Village at the site of the former Hughes Aircraft facility, said the company is in discussions with a number of tenants who are willing to “come farther out to have the low-rise campus environment. “We’re enjoying great success because of our timing,” Brown said.
