$120M Lease Fills Former Xerox Centre

Northrop Grumman is expected to begin moving into the building in phases, beginning in early December, and should fully occupy the building by July of next year. Xerox Corp. has leased space in the building since 1983 and still occupies a portion of the 16-story tower, which was built in 1972 and formerly was known as Xerox Centre. Xerox is slated to move out of its remaining space before the move-in by Northrop Grumman.

According to a report last year on GlobeSt.com, the owners of the 101 Continental building were marketing it as a multi-tenant property, rather than the single-tenant facility that it will be when Northrop Grumman moves in. Barker Pacific Group at the time said that it planned a $30 million renovation of the office tower to transform it to class A multi-tenant space, but how much of the $30 million in renovations will be necessary remains in question now that the office tower will be a single-tenant facility as opposed to multi-tenant.

McKinney tells GlobeSt.com that Northrop Grumman needs the 333,000 sf at 101 Continental for expansion of its Integrated Systems and Information Technology sectors, plus some space for corporate office administrative and engineering support functions. The aerospace giant has been growing of late, reporting a year-over-year earnings increase to $483 million from $472 million and a revenue boost of 10% to $8.6 billion for the second quarter ended June 30.

With the signing of the Northrop Grumman lease, the vacancy rate in El Segundo's 11.2 million-sf office submarket will drop to approximately 10%, the lowest office vacancy rate in El Segundo since 2000. The El Segundo office market has been enjoying an influx of tenants recently as businesses based in expensive West Los Angeles markets move there for lower rates.

The latest market report from CB Richard Ellis, for example, lists average asking rental rates of $4.29 per sf per month in West Los Angeles versus $2.18 per sf per month in the South Bay. Grubb & Ellis cites asking rates of up to $6.02 per sf in Westside markets versus $2.70 in El Segundo. Cushman & Wakefield reports asking rates of up to $5.71 on the Westside compared with an average rate of $2.54 per sf for all classes of office space in El Segundo and $2.07 per sf for the South Bay. Colliers International pegs the difference at $4.06 per sf per month in West Los Angeles and $2.07 per sf per month in the South Bay.