The Irvine Co. has signed Western Digital Corp. to what the company said was the biggest lease ever in Orange County: a 10-year, $60-million deal for a new headquarters the Irvine Co. will build in Irvine.
When the 15-story building at the Irvine Spectrum is completed in April, 1990, Western Digital will consolidate about 1,000 employees now working in eight buildings in the county. Company headquarters is now located at 2445 McCabe Way in Irvine.
The move is a boost to the Irvine Co.'s Spectrum development, which has been trying to attract more corporate headquarters as tenants.
The county's largest technology company with revenues of $462.5 million last year, Western Digital makes computer chips and other computer products.
"Western Digital had been in the market for some time," said Mike Dorsey, a vice president in Newport Beach for commercial real estate broker Grubb & Ellis. "Everybody in town was chasing that deal."
Because of that competition, the Irvine Co. likely gave up some big concessions--such as a couple of years free rent--to beat out other large developers and lure Western Digital into the 360,000-square-foot building, real estate experts said. High vacancy rates for local offices--in the low 20% range last year--also have forced developers to dole out concessions to get tenants into buildings.
"All we're saying is that we're happy and Western Digital is happy," said Richard G. Sim, president of the Irvine Co.'s Investment Properties Group. He declined to discuss specifics of the lease.
"My guess is that to attract them they had to offer some pretty big incentives," said Gary T. Wescombe, a partner at real estate consultant and accounting firm Kenneth Leventhal & Co. in Newport Beach.
"It's a pretty significant development."
While tenants often lease an entire small building, it is unusual for a company to lease such a large building, experts said.
Western Digital's Goals
Besides wanting to consolidate its widespread offices, Western Digital also wanted "the latest in energy-saving technologies to reduce our operating costs," Chairman Roger W. Johnson said in a written statement.
Sim said he accompanied Irvine Co. Chairman Donald L. Bren to a meeting with Western Digital Chairman Johnson in May and that negotiations continued almost until the lease was signed earlier this week. Sim said "all the major developers" in the county had competed for Western Digital's business.
The new building will go up in Irvine Center, the core of the Irvine Spectrum development, which is located in the crook formed by the juncture of Interstates 5 and 405.
The Irvine Co., which is looking for an architect, said construction would commence in about six months.
Spectrum already has 350 companies with 14,000 employees within the 2,600-acre office and industrial park.
AST Research Corp. in Irvine also said recently that it would move its corporate offices to Irvine Spectrum. AST said it would take a 220,000-square-foot building on a 15-acre site next year. The company makes personal computers.
The Irvine Co. is Orange County's largest private landholder with 68,000 acres and one of its largest developers.
The previous largest lease signed in Orange County, real estate experts said, was for a 12-story building with 278,000 square feet leased last year by Taco Bell Corp. at Koll Center in Irvine. Financial terms of the deal were not disclosed.
Western Digital posts lower earnings. Page 6.