Big spaces re-tooled for small firms

MARIN TECH CENTER, MORTGAGE BUILDING UNDERGO RENOVATIONS

Owners of large single-tenant commercial buildings throughout the North Bay increasingly are re-tooling their properties to attract the greater number of smaller companies.

Many of the relatively large-scale reconfigurations are coming as the properties change hands around the time of the key tenants’ departures. Rather than letting their properties get labeled as "white elephants," more property owners are investing in renovations to attract tenants.

The departure of filmmaker George Lucas’ companies from 362,000 square feet of industrial and office space in San Rafael this summer is inspiring some of the seven owners of those 14 buildings to tailor the spaces and buildings to smaller tenants.

Houston-based Hines’ July acquisition of the 455,000-square-foot Marin Technology Center on Los Gamos Drive included 115,000 square feet LucasArts vacated there.

Unlike Hines' June acquisition of the 155,000-square-foot, two-building San Rafael Corporate Center, which was designed as a campus for Fair Isaac but with multi-tenanting potential, Marin Technology Center has large floorplates that complicate smaller divisions, according to Paul Paradis, senior vice president for Hines' northern California operations.

 

Dividing up LucasArts space

Currently, the LucasArts space is in six suites ranging in size from 6,700 to 54,000 square feet. Next year Hines intends to divide those suites further to spaces as small as 3,000 square feet and could install atriums to bring daylight into the deep reaches of the property.

Hines has been considering breaking some of the space into condominiums to capitalize on the current hot sales market for such property, but a recent pickup in the Marin leasing market has the company considering renting the space first, Mr. Paradis said.

Orion Partners broker Haden Ongaro is marketing 150,000 square feet of former Lucas space in eight buildings for Seagate Properties and Buchanan Properties. Seagate has been considering converting 70,000 square feet into condominiums. Buchanan Properties is aiming to sell five buildings and perhaps divide a 17,000-square-foot, two-story building into floor-sized parcels.

He says the Lucas name cachet and extensive building improvements have been a draw for certain prospective tenants, such as startup digital animation studio CritterPix. But some tenants may not consider the building if they're not in the same industry, Mr. Ongaro pointed out.

One challenge in renovating a single-tenant building is the ownership’s perception of the cost versus the time required to sign a lease for a single tenant, according to Mr. Ongaro.

“It is quicker to get smaller tenants, but an owner may not want to spend the money to break down a building and then lead off with a 2,000-square-foot tenant,” he said. “Then the owner is committed and may not be able to accommodate a larger tenant that comes along.”

Factors heavily influencing that cost are the number and location of building entrances, fire exits and restrooms as well as the ease of adapting the climate-control system for zone control, according to Jerry Tierney of Tierney/Figueiredo Architects of Santa Rosa.

 

Advantage seen in Healdsburg site

That much space coming onto the currently small base of office space in the city will raise the current vacancy rate of 4 percent to 5 percent, Mr. Drew estimated. However, he said the building's one-block distance from the city's downtown plaza shopping district will draw tenants.

Industrial properties are getting converted, too. Woodstock Properties is upgrading and dividing the four-decade-old, 120,000-square-foot former Market Wholesale grocery distribution warehouse in Santa Rosa into one 70,000- and two 25,000-square-foot increments.

Kendall-Jackson and Beringer stored wine there, but it has been vacant since Biagi Bros. left in November 2004, according to Orion Partners’ Carlos Rivas.

He is working with the ownership to not only rework this building but also several others in the area, including a Next Level Communications building in Rohnert Park.

Few companies are in the market for a wine warehouse in Santa Rosa that large, Mr. Rivas added. But the 30 dock-level doors and the new configuration, designed by MCG Architects of San Francisco, have attracted logistics and distribution companies into serious negotiations for 70,000 and 25,000 square feet.

“We took a building that was kind of a white elephant and went to where the market was,” said Ron Reinking, an Orion agent who is marketing the building with Mr. Rivas and Mike Crockett.