Scripps Ranch is about to make its mark as a preferred corporate headquarters/research and development and office location for companies who want central proximity and more affordable rental rates without sacrificing quality or flexibility.
Over the past year, Cruzan | Monroe, Opus West and LBA Realty have invested a combined total of $73.5 million to acquire existing projects or land in Scripps Ranch. These acquisitions will culminate in approximately 330,000 square feet of corporate headquarters/R&D and multitenant office space through the repositioning of two existing facilities and a brand new 157,884-square-foot campus.
The three projects -- Horizon Tech Center, Willow Creek Corporate Center and 10150 Meanley Drive -- are the first in a wave of anticipated new and transformed projects within Scripps Ranch to serve the San Diego business community.
"The high cost of land has generated a flurry of four- to six-story Class A steel-frame developments that carry very high price points in the range of $3.75 to $4.25 per square foot, plus utilities," said Chris Wood, vice president with Opus West Corp. "In Scripps Ranch, our decision along with Cruzan | Monroe and LBA Realty to offer corporate headquarters/R&D and office product that combines quality construction, design and amenities along with great freeway access gives companies a cost-effective alternative without sacrificing image."
Research by Burnham Real Estate shows that continuing expansions by Qualcomm (Nasdaq: QCOM) in Sorrento Mesa are depleting the supply of Class A space in that market and driving rental rates up significantly for what little space is still available.
"As a result, companies who like the mid-county proximity and synergy of Sorrento Mesa are seeking other alternatives. Scripps Ranch is the logical beneficiary given preferred traffic patterns, ability to accommodate the type of product companies want and proximity to housing," said Tom van Betten, vice president with Burnham Real Estate.
Could Scripps Ranch become the next "Sorrento Mesa?"
"Research shows people increasingly want to work near where they live," said John Garrigan, of Cruzan | Monroe. "Not only is Scripps Ranch well known as one of the county's most desirable residential areas, it is also surrounded by an abundance of executive and work force housing in areas like Poway, Rancho Bernardo, Carmel Mountain Ranch and Rancho Penasquitos. It is one of the most accessible communities in San Diego County with the I-15, SR-56, SR-52 and 163 freeway all converging within a mile or two of each other."
"The setting is vastly different from other competitive submarkets, offering mature trees, running trails and proximity to Miramar Lake and other nearby service amenities, to create a very serene and beautiful environment in which to work," Garrigan said.
According to Colliers International, there are more than 5.83 million square feet of corporate headquarters and R&D product in the I-15 corridor market areas of Scripps Ranch, Sabre Springs, Carmel Mountain Ranch and Rancho Bernardo. The current vacancy rate for this product type (for spaces greater than 10,000 square feet) is approximately 6.45 percent. The three-year average absorption (2004-2006) is 82,537 square feet.
A significant portion of the current vacancy is accounted for by the 60,850-square-foot 10150 Meanley Drive building, which was acquired from a prior owner-user and has just been upgraded and repositioned by Cruzan | Monroe.
Additionally, the Colliers' report shows nearly 1.64 million square feet of multitenant office space in just the Scripps Ranch Market, 21 percent of which is presently vacant. However, more than half of this vacancy is accounted for by 111,556 square feet of available space in The Plaza @ Scripps Northridge as well as by 74,225 in LBA Realty's Willow Creek Corporate Center.
"LBA and Cruzan | Monroe both saw opportunity in the fact that these buildings would be vacated with their acquisitions, allowing them to reposition the properties to meet the expected demand for quality space in the area," said Ryan Grove, vice president with Colliers International, who is leasing the Horizon Tech campus along with Jay Alexander and Chuck Wasker.
"Now that these two facilities are ready to occupy, we will see vacancy rates decline as this space is absorbed," Grove said. "Having these prominent development firms enter a resurgent market like Scripps Ranch simultaneously is a clear indication of the potential they foresee for the area."
David Thomas, principal with LBA Realty, said "The timing of our three projects couldn't be better -- we are able to fill the immediate demand for space, and companies looking to relocate here have the benefit of knowing they are becoming part of a market that will soon rank among the county's leading places to office."
In fact, LBA Realty led the trio of development companies into Scripps Ranch with its March 2006 purchase of the 112,000-square-foot Willow Creek Corporate Center through a buyout with GreenPoint Mortgage, which had occupied 100,000 square feet in the building. LBA Realty repositioned the project for much needed multitenant office space, an effort that included a new roof, numerous building upgrades including new elevator cabs, HVAC equipment, new exterior paint, new landscaping and a new parking lot.
"Our reasons for the acquisition and repositioning of Willow Creek Corporate Center are simple: We see tremendous opportunity for this market and the project itself offered the combination of location and size that will help us fill the growing multitenant niche," said Thomas.
The Willow Creek improvements have been well received: On the first floor, The County of San Diego's Department of Purchasing and Contracting recently moved into 15,000 square feet, and ComplianceMax Financial Corp. recently signed a lease for 7,000 square feet. On the second floor, Arrow Electronics has signed a 60-month lease for 8,989 square feet. Additionally, there are signed letters of intent for the entire third floor (33,000 square feet). If completed, these leases will bring total occupancy to 68.5 percent. The remaining available space in Willow Creek gives tenants the option to lease space from as small as 1,500 square feet to 18,000 square feet.
In April 2007, Cruzan | Monroe purchased the two-story 10150 Meanley Drive building, formerly owned and occupied by Forest Health. The San Diego real estate development and acquisitions company has just finished a project facelift that includes an upgraded lobby, entirely new landscaping and an overhauled project entrance. The building is ready for tenant/user specific improvements, and is ideally suited for a full-building corporate headquarters/R&D user. The building is being marketed for sale or for lease.
Opus West is expected to break ground at the end of this month on its three-building, 157,884-square-foot headquarters campus. Called Horizon Tech Center, the two-story project is expected to deliver in early summer of 2008. The elevated site will feature a grand ceremonial tree-lined drive that will provide tenants and visitors with a true sense of arrival. The site offers westerly views and is surrounded by eucalyptus forests and is designed to appeal to defense contractors, electronic and computer computers as well as software and other research and development companies.
"What Scripps Ranch offers is truly cost-effective, efficient office and corporate headquarters space that meets the needs of today's technology and business services tenants," said Wood. "Horizon Tech Center provides all this in a new, state-of-the-art campus that is on par with any of the Class A projects found in Sorrento Mesa.
Grove is president of The Grove Agency.