Tenants Fill 329,000 SF in Leases Totaling $75M

Dave Smith, a member of a CB Richard Ellis team including Phil Brodkin and Bill Bloodgood that represented the building ownership, tells GlobeSt.com that Molina's lease represents an expansion for the healthcare firm, which already has a large presence in Downtown Long Beach. Molina signed a 10-year lease for 158,073 square feet.

Fluor signed a five-year lease for 86,610 square feet, while Jacobs Engineering will occupy 83,823 square feet for 10 years. Fluor is already a subtenant in the building and will remain in its existing space. Jacobs is a subtenant too but will be expanding its space. Fluor was represented by Rick Kaplan and Chris Bosley of Cushman and Wakefield; Jacobs Engineering was represented by Eric Olofson, also of Cushman and Wakefield.

Raytheon is vacating the building and moving to El Segundo in connection with the expiration at the end of this year of the defense and technology firm's 25-year lease of the 1500 Hughes Way complex. In addition to the remaining space in the 490,000-square-foot building, CBRE is marketing the space in a 200,000-square-foot R&D building at the Hughes Way complex that Raytheon is vacating.

Smith called the three new leases "extremely significant to the South Bay's office market," which he says, "had been bracing for a vacancy rate increase" as a result of Raytheon's intent to vacate the space. The 329,000 square feet of leases "will certainly ease the blow to the market," he says.

The South Bay office market totals about 31.4 million square feet, with a vacancy rate of 13.1% in the third quarter, according to the latest CBRE market report. That vacancy is higher than the Los Angeles County average of 10.3%, but the South Bay market was one of only two major LA County submarkets that registered positive absorption in the third quarter, according to the CBRE report.

The 1500 Hughes Way complex is located at the intersection of and is visible from the San Diego (405) and Long Beach (710) freeways. The four-story, class A office building is configured in three pods, each with its own lobby, so that the pods function pretty much as separate buildings. The complex features free surface parking of more than 2,000 spaces.

Smith says that 1500 Hughes "is functioning pretty much as a brand new building" in that Lexington is spending significantly to bring it up to class A office standards, including tenant improvement allowances. Lexington, in its most recent earnings conference call, said that in its efforts to retain tenants throughout its portfolio it has been spending up to $20 per square foot for renewing tenants and $25 to $40 per square foot for new tenants.