Western Digital Moving From Irvine Spectrum to Lake Forest

Western Digital Corp., the world’s third-largest maker of computer disk drives, said Monday that it will leave its landmark high-rise headquarters in the heart of the Irvine Spectrum for a new campus-style office park in Lake Forest.

The company estimates that it will save as much as 65% annually on facilities costs in the new location and recoup the costs of the move in four months. Financial terms were not disclosed. Real estate experts estimated the total value of the 10-year lease at $35 million to $40 million.

The company, which will start moving in November, was one of the earliest major tenants in the high-profile business park developed by real estate developer Irvine Co., Orange County’s largest landowner.

Western Digital’s departure will leave one of the Irvine Co.’s most visible buildings without a tenant. The 15-story building, across from the Irvine Spectrum entertainment center at the El Toro Y, is featured prominently in Irvine Co. marketing material.

The new headquarters consists of three two-story buildings with a total of 187,000 square feet. The 10-acre site includes a jogging trail, volleyball and basketball courts, outdoor work spaces and groves.

It’s a stark change from the 357,000-square-foot building that Western Digital has occupied for 10 years.

“There are an awful lot of people that have to make contact with one another during the day, and this vertical space is challenging in that respect,” said Matt Massengill, Western Digital’s chief executive.

The building is “certainly more than we need, and more than we desire to pay,” he said. “We have made a point of sharpening our pencil with respect to operating costs.”

The company’s lease expires at the end of the year.

The Irvine Co. is in talks with three or four prospective tenants for the building, said spokeswoman Jennifer Smith.

“Especially since there isn’t a lot of comparable space out there, we don’t anticipate that it’s going to be difficult to fill it,” Smith said.

Western Digital’s new headquarters in the Serrano Creek Center is owned by an affiliate of State Farm Mutual Automobile Insurance Co. and is managed by Birtcher Real Estate Group in Laguna Niguel.

Massengill said Western Digital has been seeking a more campus-like location for its headquarters for several years.

The new headquarters will be more convenient to about half of the company’s local employees, he said, and will be somewhat inconvenient to about a quarter of the staff. The rest shouldn’t see any change in the distance from home to work, he said.

Western Digital also has leased a 60,000-square-foot building in the Irvine Spectrum to house some manufacturing, the company’s Sage Tree subsidiary and two new undisclosed business ventures that are in the incubator stage. About 50 employees will work at the Irvine property, and more will be added as new subsidiaries develop, Massengill said.

In 1997, the company bought a 32-acre site at the Irvine Spectrum for what was to be a 450,000-square-foot campus, but the company resold it to the Irvine Co. last year amid a sharp downturn in the disk-drive market. Terms of those transactions were not disclosed, but Massengill said they did not mean a loss for the company.

Western Digital and other hard-disk makers are emerging from a disastrous period of price cuts that depressed profits even as demand for data storage products grew. Over the past 10 quarters, the company has lost more than $1 billion. Its Orange County work force has declined from 1,100 employees to about 800, and its worldwide work force has shrunk from 16,000 to 9,600.