Today's corporate tenants want to maximize efficiency, but not at the expense of the employee experience, explains Fine. "Tenants today are focused on the employee experience for retention and recruiting top talent, while enhancing their brand," he explains. "More companies are starting to see how their space is a reflection of their business, and Bolton & Co. really hit the mark in all of these areas."

Containing capital costs is a universal mandate, according to Judy Caruthers, executive vice president of JLL's product and development services group. "Being able to use infrastructure from secondgeneration space allows tenants to get more for less," she says. "In the case of Bolton, we found space that was less than five years old and capitalized on relatively new mechanical and ceiling systems, while spending capital to modify the space to meet Bolton's functional requirements." According to Caruthers, the tenant's relocation was motivated by the reality that their existing space was inefficient, and much larger than needed. "The nature of their existing space did not allow them to reduce their footprint."

Real estate is a tenant's secondor third-largest expense, so it is always important for them to review their efficiency to make sure they are getting the highest and best use out of their space, Caruthers explains. She points out that in today's environment, the answer often isn't found by moving locations, but instead by remodelling existing space.

"We've completed five major multifloor restacks in the past five years," she says, "all of which were significant capital spends motivated by reducing a footprint." She adds that to the extent that a tenant's space can become a competitive advantage and supportive of the company's culture, at the very least, a cost analysis should be done.

Changes in corporate America's use of office space are always slow and oftentimes only incremental due to the constraints of long lease cycles and the obligation to fully amortize invested capital, primarily tenant improvements, furniture and fixtures. So says Gerald A. Porter, founding principal of Cresa. Nevertheless, the overwhelming trends continue to be the densification of space, fewer and smaller private offices, a greater focus on mobile work, and more collaborative work areas within the office, he explains. "These trends clearly follow the cost-cutting realities of our current economic environment, and they reflect the empowerment of technology as reflected in a generational shift in the workforce."

But regardless of a tenant's size, more end users now seek the same services, tools, negotiation techniques and deliverables as their larger counterparts, explains Roi Shleifer, a senior managing director in Studley's Downtown L.A. office. "There's also an increased focus on the qualitative attributes as well as the cost of potential sites as factors in the selection process, which is a shift from traditionally making decisions based primarily on cost."

Another interesting aspect that Studley has had to consider lately is clients' compliance with Sarbanes-Oxley regulations, regardless of whether their company is publicly traded. "This trend has also increased users' attention to seeking real estate service providers that do not experience any conflicts of interest," he adds.

Corporate needs are constantly changing and the decusion makers face significant challenges daily as they manage their real estate portfolios, explains Shleifer. "Whether it's a growing or downsizing workforce, issues of sustainability, the ever-changing workplace needs and dynamics, in-depth market knowledge or capital constraints, there is an all-encompassing need for corporate users to come up with real estate solutions that address these issues and, at the same time, reduce occupancy costs," he says.

One interesting deal that Shleifer cites was a 500,000-square-foot renewal deal with Comcast Entertainment Group that Studley's Mark Sullivan, EVP and Southern California manager, worked on. Sullivan evaluated 13 scenarios involving variations on split, partial-split and consolidated facilities and created space demand studies, scenario capital forecasting and financial analysis. In a typical renewal negotiation, both parties try to establish the market norm by examining comparable transactions, and then they try to set the renewal in that context, explains Shleifer.

"This sometimes results in the renewing tenant paying a premium to market as they concede that time and operational circumstance renders them 'captive'—especially if the tenant has constructed expensive specialty spaces." In this particular case, he says, Studley inverted this by "first creating viable relocation alternatives with term structures reflecting current market conditions and Comcast's cost of funds."

In order to extend the tenancy, the existing landlord was forced to match the competitive terms in the long term and provide CEG short-term flexibility. The 10-year lease extension reduced rental payments by 36%. In addition, the lease can be terminated at 30 and 60 months to allow potential consolidation to an existing or new property elsewhere, he adds. "In addition, cost-containment strategies further drove construction budgets down 30% from already drastically reduced costs."

According to Cresa's Porter, major corporations across all the major industries in California—entertainment, life sciences, utilities and professional services—choose to renew in place and downsize, with minimal new capital spending. "Campus consolidations abound as companies look to reduce their footprint while taking advantage of soft rents in most markets and preserve their previous investments in their space," he says. "Space, for these companies, has become a commodity."

At the same time, there are some unique submarkets, such as Santa Monica and SOMA in San Francisco, that have experienced a resurgence in demand not seen since the bubble days of the dot-com era. "Some of these companies are well capitalized and are making decisions based on lifestyle, competition for talent and brand identity—not necessarily for economic efficiency," Porter explains. "Although these companies tend to be high profile and attract a lot of media attention, statistically they're more of an anomaly in the overall market."

One thing all sources agree on is the constantly changing needs of tenants. Jonathan Larsen who, recently took a new position as regional managing principal at Cassidy Turley, points out that the first thing end users are looking for in their space is flexibility. "Space flexibility would include: right to terminate early and the ability to expand and contract with short notice," he says. In addition, the end user is looking for efficient space with a lowrent/ usable-square-foot ratio, he adds. "If the building is not as efficient as others in the market, the end user would negotiate a 'capped' load factor."

You can consider Edwards Lifesciences as the poster child for flexibility. Tom Porter, VP of real estate at the Irvinebased medical device company, tells Forum that "My group can't foresee where each of the business functions are going, so we attempt to build flexibility into our process and solutions to enable us to accommodate changes in an expedited fashion," he says. Some examples of this are building in the ability to expand, contract or even exit particular spaces when the business need for that space changes, he says.

He says flexibility--within the requirements of pre-established standards--is also key in terms of how his company builds its space. "With our office space, we create a standard for numerous levels within the organization and then, for scenarios that require larger space, we use the office standard as the basis for those other needs."

For instance, he says, a vice president who conducts numerous meetings and needs some conference as well as office space, would get an office that is half again the size of a regular one. "This allows us to convert three regular offices into two VP offices."

Conference rooms are also built on an office standard module, he adds, so when required, a conference room can be converted to a number of offices or vice versa, without the need to change the design of the floor or area. "To help accommodate these changes, we also use a mix of standard hard-walled offices as well as use modular full-height walls to allow us to make changes easily," he says. "As groups grow, change or move to other locations by creating the standards, we can accommodate those changes with speed and also reduce cost to the company."

Within Edwards' laboratory and clean room space, the company also uses that modular concept. Electrical drops, compressed air drops and water supply, for example, are built on a grid basis up in the ceiling to allow the company to change quickly the process or product that is being produced.

"This flexibility allows us to respond to changing requirements without the need to come in and rebuild the room for every new use," he says. "Even with the use of furniture, we utilize benches, tables, etc. that have wheels so that the room can be reconfigured as needed by the users themselves."

According to Larsen, California has had a wave of exodus to states such as Tennessee, Texas and Arizona and the Washington, DC area. Top reasons for that, he says, are tax benefits, affordable and quality housing and an available labor pool at competitive compensation. "California has always been an innovator of new business ideas and technology," he says, adding that the state needs to work on retention strategies "to avoid the continuing loss of top companies that began here."

Mary Jane Olhasso, Economic Development Agency administrator for San Bernardino County, points out that California has the location, quality lifestyle and highly skilled talent that will continue to attract companies and encourage start-ups.

"You can't deny that in Southern California alone, we have a population of 23 million," she says. "That is a dynamic and lucrative market." It's also what's driven the expansion of industries such as furniture and plastics in San Bernardino County, she adds.

Olhasso says it's the responsibility of county and city governments to create a market of certainty for investment. For example, she says that San Bernardino County has spent the past year bringing together all of its resources and joining its publicand private-sector partners in education, technology, healthcare and real estate, among other industries, to ensure that it can provide the certainty, resources, lifestyle and talent that are critical to today's corporate users. "Too often, businesses are unaware of the job training and workforce incentive programs that are available to them through their local workforce investment board," she says.

But while California isn't known as the easiest place to do business, firms such as Edwards Lifesciences are proof that companies are continuing to make the state their headquarters.

"California is home, based on the intellectual talent that we have here, quality schools and the ability to attract and retain the talent required to run our businesses," says Edwards' Porter. Aside from the cost and the challenges of doing business here, people want to work in California due to the climate, he adds. "Also keep in mind the number of quality universities bringing in business. Think of Silicon Valley, or the tech industry in general, that was created by people coming out of school and wanting to stay where they attended college."