Corporate America heads for downtown L.A.

Today, when thinking about relocating to downtown Los Angeles, Corporate America has in mind much different requirements for office space than those of just a few years ago. In recent times, according to some industry leaders, those tenants which are considered to be 'Corporate America' -- the AIG's, the MCIs, the Marsh & McLennan's, the Tandems, Chicago Titles, Eastman Kodaks and Xeroxes -- are seeking prime, Class A office space that reflects a less flashy presence in favor of a more conservative philosophy. These companies no longer need to be located on the penthouse floors of the tallest office towers in downtown Los Angeles. Economies have changed, and corporations are favoring facilities whose subtleties quietly speak of assurance, power and prestige. "Factors contributing to this fundamental change within the real estate industry," according to Kenneth Hitchcock, Jr., vice president and regional manager for Marcus & Millichap Corporate Real Estate Services in Downtown Los Angeles, "include companies demanding to reduce their rent by reducing their space needs through outsourcing, operating more efficiently, doubling up on offices and encouraging telecommuting, all of which have led to a leaner style of business."

Cushman & Wakefield's John Eichler believes that tenants are still seeking high-quality, efficient office space with a wide range of amenities, but there is evidence suggesting that practical considerations are more important today. For example, he points to the trend of cost reduction-driven leasing activity experienced in the downtown financial core. The cornerstone of this trend may have begun in 1990 when the Trust Company of the West relocated to less opulent office space at 865 S. Figueroa on the Figueroa Financial Corridor. This move was followed by other companies seeking to contain costs, as evidenced in Chicago Title Company's occupancy at MCI Center, Northern Trust Bank of California's tenancy in space previously occupied by IBM at 355 South Grand, the Bank of America's occupancy of Beaudry Center, and the new interest of insurance companies in relocating to downtown's Central Business District as evidenced in recent leases signed by Marsh & McLennan Inc. and AIG Inc. MCI's MOVE

One of the most visible moves by Corporate America was MCI signing a 10-year deal for approximately 60,000 square feet of office space at 700 South Flower, confirming the company's commitment to Los Angeles by making the office tower located at Seventh and Flower Streets the home for its Pacific Southwest regional headquarters.

In fact, the signing of the lease precipitated Broadway Plaza, comprised of 700 South Flower office tower, Broadway Plaza retail shopping center, and Hyatt Regency Los Angeles luxury hotel, to be renamed MCI Center in 1993. Today, MCI gains immediate recognition in Los Angeles because its sign sits atop the 680,000-square-foot, 33-story office tower, -- some 540 feet above the street -- and is easily seen throughout the financial corridors of downtown. "We have been very pleased with the facilities at the MCI Center and its central downtown location," said Cindy K. Andreotti, Pacific Southwest Regional Vice President for MCI's Multinational Accounts Division. "We have equipped our offices here with state-of-the-art videoconferencing and presentation rooms that showcase MCI's technology expertise to customers worldwide." Even though Corporate America companies are looking for less-flashy locations at which to conduct business, they aren't moving to the low-rent district. Quite the contrary. Highly regarded among these companies is finding quality office space, combined with an attractive amenity package. Recent leasing activity is proving that the ready availability of plentiful amenities is definitely an attraction for those firms whose employees appreciate the efficiencies offered by being officed in complexes such as MCI Center that, among other things, encompasses an on-site luxury business hotel, and a regional shopping mall, plus a generous parking allotment.

CHOOSING A BUILDING

"As brokers we are in touch with the office requirements of corporate America on a day-to-day basis. To this end, we are finding that certain buildings better meet the needs of these tenants than others," Eichler says. He noted that MCI selected 700 South Flower for its regional headquarters after reviewing the numerous options now available in downtown L.A.

It's been a little over a year since MCI Communications Corp., the Washington, D.C.-based $12 billion global telecommunications company, relocated its Pacific Southwest regional headquarters to 700 South Flower at MCI Center. MCI, a Fortune 100 service company, is the second largest long-distance carrier in the United States, with approximately 18 percent of the estimated $55 billion long-distance market. It is the first of a procession of firms locating in Downtown Los Angeles.

Eastman Kodak, a $20 billion Fortune 500 firm founded in 1880, and one of America's oldest and most respected companies also found that 700 South Flower could meet its corporate needs. The company, best-known as a photography products and services manufacturing and marketing firm, also has a wide range of interests including film, papers, chemicals, motion picture film, copiers and duplicating, electronic imaging products, pharmaceuticals, clinical analyzers, fibers, plastics and household, do-it-yourself products. Its district sales division relocated approximately 40 employees to 700 South Flower in the second quarter of 1993 from 818 W. Seventh Street.

CHICAGO TITLE

Another Corporate America tenant at 700 South Flower is Chicago Title Co., a member of the Chicago Title and Trust (CT&T) Family of the Title Insurers, the largest title organization in the United States.

"It just made good business sense to relocate because we had two downtown offices that did basically the same functions following our recent acquisition of Ticor Title," said Russ Sherman, executive vice president and western division manager of CT&T Family of Title Insurers. Sherman said the commercial and industrial group now will have approximately 70 employees, making it even more important to be located near public transportation, such as the Metro Rail Blue Line, while having access to sufficient parking.

George Comstock, a Xerox real estate project manager, said the company selected its location because "we feel it serves our business needs and the many amenities and services offered by the complex meet the staff requirements of our Los Angeles sales district."

Comstock added, "The complex's location to the Central Business District, the Metro Rail system, and other convenient transportation modes, its ample parking, restaurants and a shopping mall, all were factors in our decision." Xerox, a multinational company in document processing and financial services, signed a 10-year deal for approximately 30,000 square feet at MCI Center, according to Eggleston, who represented the landlord.

All of the leasing activity by these firms points to a renewed effort by Corporate America to conduct business in a no-nonsense way. According to Hitchcock. "If you look around downtown Los Angeles you'll find that some buildings are doing quite well right now, and those are the ones which offer more value through aggressive economic packages, as well as a more conservative office environment while still providing top-quality, flexible office space, with a wide range of amenities." Further, he adds, "The opulence that exemplified the 1980s is dead. Just look at Pacific Enterprises' space at First Interstate World Center. That empty space clearly sends a message of excess wealth and expenses to clients, and that is definitely not the right thing to communicate in the 1990s."