Hughes-Raytheon Deal Not Expected to Affect O.C. Real Estate Market

Some areas of Los Angeles County are girding for a real estate glut in the wake of Raytheon Co.’s proposed purchase of Hughes Electronics Corp.’s defense units, but Orange County’s commercial real estate market shouldn’t see any fallout, real estate analysts say.

Hughes already has slashed its Orange County operations, and its largest local property, the 350-acre campus in Fullerton, is for sale.

The company leases two small buildings in Irvine and Newport Beach for its remaining Orange County defense operations, but the those closures should not slow the county’s commercial and industrial markets, which are staging a comeback after years of stagnancy, real estate insiders say.

Farther north, in Los Angeles County’s South Bay region, it is a different story.

Still struggling to fill up huge amounts of empty space, South Bay landlords and real estate brokers are preparing for more if the Hughes sales goes through.

Hughes is one of the largest users of commercial space in the South Bay. Since 1992, the company has vacated about 5.2 million square feet of space throughout Southern California, primarily in the South Bay, according to company officials.

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Orange County already has weathered a real estate crunch triggered by defense downsizing. It started in 1990, when defense cuts of the late 1980s threw so many people out of work and made so many others nervous about job security that people quit buying homes.

In one year, the county’s housing industry--then considered a linchpin of the local economy--tumbled into recession. At the same time, portions of North County and the Newport Beach and Costa Mesa areas were flooded with industrial and commercial buildings vacated by downsizing or dying defense companies.

The housing and commercial markets have begun recovering, though, and industry insiders say they see nothing in a Hughes-Raytheon deal that could trigger a new collapse in Orange County.

Indeed, Fullerton business development director Kay Miller says she’s been told by Hughes that the company will continue its efforts to sell its sprawling campus there. Raytheon officials did not respond to a request for comment.

City officials want Hughes to sell the land to an industrial developer who would turn it into a job-generating manufacturing and distribution center. Hughes, however, knows the land, on the edge of Fullerton’s pricey Sunny Hills neighborhood, would be far more valuable if used for residential developments. In a compromise with the city, Hughes agreed to try for one year to sell the land to an industrial buyer. If the company is unsuccessful, the city has agreed to change the designated land use from industrial to residential.

Hughes still has about nine months more to offer the land for industrial use. So far, said one insider, the company has not had any serious inquiries.