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El Segundo Business in the News

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Offices Go Industrial Chic

By Hannah Madans

A new set of tenants is competing for space with ecommerce fulfillment and delivery operations in Southern California’s tight warehouse market.

Startups and companies in creative industries, local brokers say, are increasingly seeking warehouses that can be converted to office space. In part, that’s because space in a warehouse tends to cost less than space in a high-rise office building or professional campus.

“There are a lot of companies that are looking for less expensive alternatives to office space,” said Jones Lang LaSalle Inc. International Director Carl Muhlstein.

Plus, there’s the cool factor.

“There’s such a need for really cool creative office space,” said John Wiedner, an executive vice president at Hackman Capital Partners, which is working to overhaul a former Northrop Grumman Corp. manufacturing and warehouse complex in El Segundo.

Hackman plans to keep some of the facility’s original industrial features. The firm may convert the freight elevators to conference rooms and keep old cranes and other equipment in the building. The project is slated for completion in July 2020.

“Buildings like this are rare to find,” Wiedner said, noting that older defense contracting facilities are good prospects for office conversions. “It’s such a fun opportunity to give a building a new life and better use.”

Andrew Berk, a principal at real estate company Avison Young, said newer companies and younger executives see creative office design as a way to attract talent. “Those employees are looking for authenticity, not a Class A, vanilla high-rise office where they have to get into a more sterile lobby and elevator every day,” Berk said.

All the rage again

Two decades ago, during the dot-com boom, there was a surge of interest in warehouse office conversions from up-and-coming technology companies.

Petra Durnin, director of field research for real-estate brokerage CBRE Group Inc., said many of those outfits were looking for “nontraditional office space,” much like the startups of today.

“The freestanding industrial product that is prevalent on the Westside created a perfect opportunity for these companies to really brand themselves,” Durnin said.

The trend petered out when the dot-com bubble burst. Now it’s making a clear comeback.

“Warehouse space is more and more coveted these days,” said Ann Hand, chief executive of esports company Super League Gaming Inc., which operates out of a warehouse in Santa Monica. “People like the culture and the way it feels more modern and progressive and skewed toward collaboration.”

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