SPECTRUM OF HIGH-TECH INDUSTRY : Diversity of Tenants Helps O.C. Center in Tough Times

IRVINE —  In 1984, developers were building 30 high-technology business parks in states from Maine to California, frequently touting each as the “next Silicon Valley.”

When the Irvine Co., the giant Orange County developer, unveiled plans that year for a 2,600-acre technology park to be called the Irvine Spectrum, company officials had something altogether different in mind.

Sure, the Silicon Valley collection of technology companies had won the San Jose area international acclaim as the world’s computer-chip manufacturing mecca. But that glittery image was tarnished when the semiconductor industry hit nasty slumps in the early and mid-1980s, forcing thousands of layoffs in the valley.

“We went after a more diverse mix of high-tech industries. We definitely did not try to become another Silicon Valley,” recalls Richard G. Sim, president of the Irvine Co. investment properties group. “Silicon Valley is a one-industry town, and that is its disadvantage.”

Long known for its defense contractors and Disneyland, Orange County is now gaining recognition as a technology center as well, albeit one that is uniquely Southern Californian. The Spectrum itself could be compared to a glitzy shopping mall where high-tech companies set up shop as much to sell their names as their products.

“I think the Disneyland image is long gone,” said Roger W. Johnson, chairman of Western Digital Corp., a computer components manufacturer and the biggest employer in the Spectrum. “Of course, there is still some arrogance in Silicon Valley. . . . But I think this area will also be known as a broader-based technology center.”

True, Silicon Valley is focused on microchips and computers, whereas the Spectrum has a diverse mix of computer, biomedical and biotechnology companies, and even an aerospace company or two. By comparison, each of five cities in Santa Clara County, where the center of the Silicon Valley is, has as many computer companies as the entire Spectrum development.

But seven years after its birth, the Spectrum is experiencing some growing pains. And not everything in the Irvine Co.’s master plan has gone as expected.

Many Spectrum tenants have stopped expanding, and some are laying off workers. Although land sales have gone well, a glut of commercial real estate has helped push the park’s office vacancy rate to 23%--slightly higher than the countywide average of 22%.

To be sure, other business parks that had hoped to mimic the Silicon Valley model have encountered similar problems, said Michael Beyard, a researcher at the Urban Land Institute, a Washington-based think-tank.

“So many high-tech centers have hit hard times that you don’t hear much about Silicon Valley comparisons anymore,” he said. “The developers didn’t realize that you had to have things like human resources, a favorable business climate and an attractive lifestyle to draw businesses, in addition to the land.”

Still, even half-completed, the Spectrum has become Southern California’s biggest technology park.

Change in the regional economy has helped to fuel the Spectrum’s growth. Orange County’s technology base has traditionally been centered on the aerospace industry in the northern part of the county. That has changed, however, as biomedical and computer companies have sprouted in the southern part. These companies, in turn, have attracted a variety of service professionals--bankers, venture capitalists, lawyers and accountants--who are specializing in technology.

“The center of gravity in high-tech is shifting to the Irvine Spectrum,” said Nick Yocca, a partner in a Newport Beach law firm and an expert in law for high-tech companies. “We’ll probably have to follow our clients and open an office there.”

James L. Doti, economist and president of Chapman College in Orange, believes the county will lose 10,000 defense jobs over the next five years, but that it should also add more than 25,000 high-tech jobs, with Spectrum employers accounting for a good number of those.

“There’s no question we’re losing our defense industry and there is a change in manufacturing taking place,” Doti said. “If we didn’t have the high-tech, we would have had a disaster in the economy.”

More than 150 computer and electronics firms have set up operations in the Spectrum. Some of the better-known names are Advanced Logic Research, AST Research, Toshiba America Information Systems and Western Digital. Western Digital has both its world headquarters and a $120-million state-of-the-art chip manufacturing plant in the park. Although computer companies make up the largest industry segment, the park is home to the likes of AT&T;, Canon, Kawasaki, Mazda and Parker Bertea Aerospace.

Sim of the Irvine Co. says the Spectrum has grown far faster than the company had originally expected. On average, about two companies join the Spectrum roster each week. The rate of new tenancies has slowed, however, with the real estate glut and the recession.

Although Spectrum land is more than twice as expensive as that in places such as Ontario, the first four sections of the park are nearly sold out, said Robert Dunham, a Newport Beach economic consultant.

Seen from the air, the park’s five sectors resemble a patchwork quilt that goes across freeways and major boulevards. It is bordered by hills to the south and the El Toro Marine Corps Air Station to the north. From the ground, the Spectrum looks like a combination of classic Silicon Valley and Southern California styles: low-rise buildings with lots of smooth curves and mirrored glass, lush landscaping, palm-lined streets and open fields where strawberries still grow.

The business park traces its origins to 1975, when the Irvine Co. opened the Irvine Industrial Complex East in an area that would later form the northern part of the Spectrum. The developer hoped to lure the expanding companies who were outgrowing their quarters in Anaheim, the John Wayne Airport area and nearby Los Angeles County cities such as Torrance.

In 1984, Irvine Co. officials shifted from recruiting all kinds of industrial tenants and announced plans to transform a huge parcel in Irvine into a high-tech, research and business park.

The Silicon Valley’s growth was anything but orderly. Dozens of small companies were started by engineer-entrepreneurs who left a few large companies such as Fairchild Semiconductor and Shockley Laboratories to strike out on their own. But Orange County was a place where a land baron like Irvine Co. Chairman Donald Bren could dictate a vision to create a mega business park.

The plan called for UC Irvine, a few miles to the west, to play a key role in the park’s growth by producing engineering graduates and sharing research, particularly in the biomedical field, with companies in the Spectrum.

Since 1984, both the biological science and engineering schools at UCI have doubled their numbers of graduates. The university estimates that by 2005, it will be producing as many graduates as comparable departments at UCLA and UC Berkeley.

The Irvine Co. spent $226 million to build an infrastructure of arterial roadways and overpasses. It also built Irvine’s first Amtrak station and has plans for a monorail system that would link the park with a larger rail system connecting Orange County communities.

Prospective tenants are shown a promotional film depicting a lot of high-tech pizazz while Irvine Co. officials--sometimes even Bren himself--try to persuade them that the park’s premium rents are worth it. The prospects are told about the Spectrum’s proximity to the newly expanded John Wayne Airport, the cultural and other lifestyle advantages of Orange County and of its position as a West Coast gateway to the booming Pacific Rim market.

Some small companies are even willing to pay premium rents for Spectrum space as a way to project an image of success. “The Spectrum represents technological leadership, the place to be,” said Michael de Nicola, vice president of operations at WangDAT, a maker of computer storage equipment that moved from Costa Mesa to the Spectrum last month.

But some snags in the Irvine Co. master plan have surfaced. The recession has battered the computer industry, forcing companies such as Western Digital and Toshiba America to lay off hundreds of workers. And the state’s current budget woes threaten to slow UCI’s growth.

The steep cost of doing business in Orange County is also hurting Spectrum recruiting efforts. The county has begun losing manufacturers to states such as Nevada and Arizona, where wages are cheaper, taxes lower and environmental regulations less stringent.

For all its vaunted diversity, the Spectrum has proven most attractive to high-tech companies as a place for engineering, research and light-assembly operations. With the Western Digital semiconductor plant a major exception, there are few manufacturing plants in the park. (Western Digital built the plant in the Spectrum because it wanted its engineers to be intimately involved with the manufacturing process.)

“The higher the content of technology, the more likely you would be to move into the Spectrum,” said Dennis Eversoll, chief financial officer at Toshiba America, which moved into the Spectrum in 1985. “The heavier the manufacturing, the more likely you are to be moving out of the county.”

Company officials have backed away from their original 1984 estimate that the park would have 100,000 workers by the year 2000. And the Irvine Co. itself has taken steps that will slow the park’s growth. The developer earlier this year imposed a moratorium on constructing new buildings in the Spectrum that is to continue through the middle of 1992. And the promised Irvine Co. shopping mall in the Irvine Center area bounded by the Santa Ana, San Diego and Laguna freeways, has been postponed. The mall, which would have served thousands of Spectrum workers at lunchtime and after work, was originally scheduled to be completed by 1992.

“We’re not going to see a return to the fast growth of the late 1980s in the Spectrum,” said Scott Perley, branch manager for Cushman & Wakefield in Irvine. “It should still continue to grow with the rest of the economy, and the complete build-out will probably happen between 2010 and 2020.”

SILICON VALLEY: Staying on Top of the High-Tech Heap As a center for high-tech manufacturing, Orange County still lags well behind its northern competitor, Silicon Valley, centered in Santa Clara County. In addition to its legendary computer industry, Silicon Valley plays a much larger role than Orange County in making communications equipment and instruments for measurement and process control. Orange County leads in only the defense-dominated search and navigation sector, which has shrunk by a third since 1988 because of Pentagon budget cuts. But the overall durable-goods manufacturing industry in Orange County is more diverse than Silicon Valley’s, with just half of its jobs dependent on high technology, versus 82% up north.

Santa Clara Orange County Computer and office equipment 56,300 14,200 Communications, electronic equipment 75,000 21,700 Aircraft, missiles 25,500 24,000 Search and navigation 10,600 17,500 Instruments 27,000 8,100 All high technology 194,400 85,500 All durable goods 236,300 181,200

SANTA CLARA COUNTY Pct. of Durable Goods Mfg. Computer and office equipment 23.8 Communications equipment 31.8 Aircraft, missiles 10.7 Search and navigation 4.5 Instruments 11.4 Total high-tech 82.3 Other Durables 17.7

ORANGE COUNTY Pct. of Durable Goods Mfg. Computer and office equipment 7.8 Communications, electronic equipment 12.0 Aircraft, missiles 13.2 Search and navigation 14.7 Instruments 4.5 Total high-tech 52.2 Other durables 47.8

Source: Employment Development Department

Irvine Spectrum Size: 2,600 acres in five areas Location: South Irvine, centered at the intersection of the Santa Ana and San Diego freeways Companies: about 1,000 Employees: 25,000 Founded: Northern portion started in 1975; five-part Spectrum founded in 1984 Source: The Irvine Co., Spectrum International

High-Tech Tenants Roughly a fifth of the businesses at Irvine Spectrum are involved with technology or the biomedical field as manufacturers, distributors or researchers.

Total high-tech and biomed: 177 Computer hardware and supplies: 40 Electronic equipment and supplies: 41 Instruments and analytical test equipment: 3 Aerospace: 8 Research and Development: 8 Energy and environmental technology: 11 Medical equipment and supplies: 31 Computer software: 35 Source: The Irvine Co., Spectrum International