Corporate moves: firms find Downtown L.A. attractive.

Corporate moves: Firms find downtown L.A. attractive

"Unocal chooses Downtown Los Angeles" trumpet the headlines. "Bank of America relocates data processing facilities to Arizona." "U.S. Borax returns to Palmdale."

All of these corporate relocations have been closely watched in the media because they represent the bottom line, jobs and the financial well-being of our community.

Most large firms are signing 10 to 15 year leases, so in effect they are showing us the future of the local economy and job location well past the turn of the century.

Generally, the leasing of corporate office space and manufacturing facilities reflect the move toward efficiency as companies struggle to compete in the international arena. The operative phase is "right sizing," leading to two major trends affecting corporate real estate today.

The first is in saving money by leasing the most efficient and cost-effective facilities available and the second is complying with the wide range of government regulations.

Out are lavish corporate headquarters reminiscent of the financial boom of the 80s and in are large, multi-tenant office complexes where space can be used and re-used as the needs of the corporation change.

Accounting giant Coopers & Lybrand, for example, had intended to build a signature corporate headquarters building in the City West area of Downtown Los Angeles. As an equity participant during the boom years, the firm would have been able to take advantage of the benefits of ownership but today would be subject to the vagaries of an overbuilt market.

Reversing direction for the more sober 90s, Coopers & Lybrand has now simply leased space in an existing downtown building, California Plaza II. What might have been cash calls on the partners have now become distributions.

In search of less expensive real estate and cheaper operating expenses, Bank of America has announced the relocation of its credit card facility from Pasadena to a new building vacated by a bankrupt local bank in Phoenix. This state-of-the-art computer facility was purchased for less than 20 percent of its original construction cost, and lower housing costs in the area make the cost of living lower for employees.

When real estate bargains abound nationwide because of the recession, U.S. corporations will undoubtedly relocate in order to ease economic burdens.

Some corporations are also moving out of Southern California to avoid the South Coast Air Quality Management District.

The AQMD is faced with the possibly insurmountable goal of bringing air quality in the Los Angeles Basin into compliance with federal regulations by the turn of the century. This goal requires immediate and material actions to be taken which impose costs on everyone. Of course, there is a continuing exodus of "duty" manufacturing operations, but others are considering relocating to avoid ride-sharing costs.

Other companies, such as ARCO, have made dramatic changes in their employee incentive plans to motivate the use of rapid transit. By reducing the parking allowance paid to ARCO employees, and increasing to $100 per month the allowance for bus and train travel, ARCO has encouraged nearly 40 percent of its 1,500 Downtown employees to use rapid transit, and has reduced its solo drivers to only 33 percent of the total.

On the other hand, when the production value of the employee is high, or the business is locally based, companies will continue to concentrate on Downtown. The high quality, efficient buildings and access to a wide range of rapid transit alternatives will continue to draw large corporations.

This process is being assisted by the current availability of inexpensive long-term leases on large blocks of office space.

Southern California Gas Company's impending move into nearly 550,000 square feet of space in Downtown, exemplifies today's trends in corporate leasing.

The company will be able to efficiently integrate all its employees on large floors and at the same time encourage them to get out of their cars and take advantage of the developing rapid transit system which centers on Downtown.

Across California, corporate managers are faced with smaller budgets and tougher global competition. Their response has been in most instances, to down-size their employment and real estate facilities.

As the economy rebounds, the challenge for California will be to integrate the tangle of government regulations, high taxes and no-growth sentiment with the state's tradition of providing a nurturing business environment.

Steve Marcussen is associate vice president of Los Angeles-based Cushman Realty Corporation and executive vice president of the Los Angeles Chapter, NACORE.