Space Demand by iPhone Maker Expected To Increase in San Diego, Los Angeles
Apple plans to eventually employ more than 5,000 workers in San Diego, where it has already leased more than 650,000 square feet of offices. (Apple)
By Lou Hirsh
April 26, 2021 | 2:56 P.M.
While initial attention on Apple’s new plans to invest $430 billion nationwide over the next five years was on a new campus in North Carolina, the growth will significantly boost its workforce and footprint targets in Southern California, as the iPhone maker looks to add more than 5,000 workers in San Diego and 3,000 in Los Angeles-adjacent Culver City by 2026.
That marks a near quintupling of Cupertino, California-based Apple’s previously announced expansion goal for San Diego and a tripling of its prior Los Angeles target. The tech giant is expected to take up more office and industrial space as it bolsters U.S. investments in fields such as silicon chip engineering, artificial intelligence, 5G telecom technology and streaming entertainment.
“At this moment of recovery and rebuilding, Apple is doubling down on our commitment to U.S. innovation and manufacturing with a generational investment reaching communities across all 50 states,” CEO Tim Cook said in a statement Monday, as the company announced projects expected to create 20,000 new jobs over the next five years.
Apple’s expansion involves investments in multiple U.S. regions, led by the planned $1 billion campus in North Carolina’s Raleigh-Durham area expected to create 3,000 jobs. In Clayton, Indiana, the company is planning a $100 million distribution center tied to its silicon engineering, 5G and manufacturing supply chains, which the Indiana Economic Development Corp. estimates will create 500 jobs by 2024.
Apple did not immediately respond to CoStar News’ requests for additional comment.
In Southern California, Apple is building upon growth that has been underway for years. The tech giant has been expanding its entertainment division in Culver City as it seeks to compete with Netflix, Amazon and other streaming services to capture surging demand for original shows and films. Apple’s productions include the Academy Award-nominated animated film “Wolfwalkers” and the Emmy Award-winning series “The Morning Show.”
Kristina Raspe, vice president of global real estate for Apple, said in a 2019 statement that San Diego is expected to “become a principal engineering hub for Apple, with new positions distributed across a number of specialty engineering fields, to include both hardware and software technologies.”
The company in 2018 announced plans to bring 1,000 workers to San Diego for its first local presence outside of its mall retail stores, and revised that to 1,200 workers in 2019.
San Diego Leases
Apple signed San Diego office leases totaling more than 650,000 square feet over the past two years, most recently taking nearly 200,000 square feet at developer Jay Paul Co.’s Summit Rancho Bernardo complex, and brokers noted that the company added to its prior leasings in the city’s University Town Center neighborhood by taking up subleased space earlier this year.
“Apple seems to be the savior of vacant office space in San Diego,” said Ron Miller, senior vice president at brokerage Colliers International in San Diego, who is not directly involved in Apple’s pending space searches. “No other company is taking local space on that scale at this moment except for Amazon, though that is mostly for industrial uses.”
Apple did not disclose what specific locations it expects to use for its growth or whether it intends to lease or buy additional real estate.
Joshua Ohl, director of market analytics for CoStar Group in San Diego, said he predicts the company could “take a combination of existing and proposed space to accommodate that expansion here.”
“Rancho Bernardo has both, with a project like Merge or Santa Fe Summit, or in existing buildings with contiguous blocks of space larger than 50,000 square feet, of which there are about eight available,” he said.
If he were placing bets, Miller said he would predict Apple’s next expansion to take place in UTC, where it previously leased large blocks from landlords Irvine Co. and Kilroy Realty Corp. One possible location: the high-profile La Jolla Commons complex, which he said has more than 100,000 square feet available, much of it recently subleased by biotech firm Illumina, and where landlord American Assets Trust has begun grading on a planned third tower that could also house future Apple growth.
“It just makes a lot of sense to me, since it’s so close to where Apple has already leased space,” Miller told CoStar News. “It just depends on whether the types of build-outs you would need in that property would suit Apple’s needs.”
Ohl also noted that San Diego’s Sorrento Mesa enclave, home to the headquarters of telecom chip giant Qualcomm, has both types of new and renovated space, with older office buildings increasingly being converted to R&D uses and other existing buildings with large blocks available. The South County city of Chula Vista is a potential wild card, since it has relatively affordable blocks of space and a large cluster of professionals with science and technology degrees.
“UTC always makes sense because that’s where Apple has already signed four leases since the end of 2018, the most recent being the sublet space at [Irvine Company’s] Eastgate,” Ohl said. “They would probably take more build-to-suit space there since there are fewer large blocks available right now.”
“But since it’s a five-year horizon, there’s plenty of time and enough proposals in the pipeline to find the right space,” Ohl added.
In Culver City, Apple has been growing its entertainment division as it seeks to compete with streaming services. The company already leased the full 128,000 square feet at Clarion Partners’ recently completed office building at 8777 Washington Blvd. and is expected to develop more space to meet its revised larger workforce expansion target.
In November 2020, Apple acquired five industrial and warehouse properties in a $162 million deal focused on the same Culver City block that is home to its planned new content division operations.
“There is definitely not enough space to accommodate 3,000 workers in 8777 Washington,” said Ryan Patap, director of market analytics for CoStar Group in Los Angeles. “Given Apple’s acquisition of 4.5 acres adjacent to their new L.A. offices late last year, it is clear they are planning on building additional office space on the site and will be creating a larger campus in Culver City.”
The growth comes after Amazon has been significantly expanding its entertainment division in Culver City with the lease of the historic Culver Studios and additional offices nearby. Among other entertainment growth in the small city within Los Angeles County, premium cable channel HBO is also moving its headquarters into Culver City.
Apple’s broader planned expansion also follows search giant Google’s announcement earlier this year that it plans to double its presence in a Sorrento Mesa building in San Diego, where it will expand from two floors to take the full four-story building as part of a larger Southern California expansion that also includes Los Angeles.