The announcement by Farmers Insurance Group last week that it plans to move its headquarters to Warner Center could be a critical spark that reinvigorates the district’s office market. The company, which last year moved 1,200 employees to offices on Owensmouth Avenue after acquiring auto insurer 21st Century Insurance, plans to bring an additional 1,400 personnel to Woodland Hills. In the process, over the next five years, it will fully occupy two buildings at what is now called Farmers Plaza. The West Valley office market has struggled with a vacancy rate that topped 20 percent in the first quarter, even as the Central Valley tightened, according to data from the Los Angeles office of Colliers International. “This is big. It’s beneficial in a couple of ways. Certainly it will have an effect on the numbers,” said Jeff Albee, senior vice president at Colliers’ Encino office, who has worked in the Valley office market for decades. “But it’s really more psychological. The Valley needs another headquarters. This is what Warner Center was planned for.” Farmers is putting its landmark offices on Wilshire Boulevard on the market, and by 2018, the Valley will be home to 70 percent of its Southern California workforce. And by taking over both buildings, the firm will nearly double its Valley real estate to 540,000 square feet. The company has signed a lease through 2027 on its existing space, which totals 274,000 square feet. It plans on swallowing up the rest of the buildings’ offices as they become available, eventually occupying all of 6301 and 6303 Owensmouth Ave. The area became attractive for expansion when Farmers learned it would need to complete extensive seismic retrofitting of its 89,000-square-foot Park Mile campus, including its landmark headquarters building constructed in 1937. “We were looking at having to do some expensive and time-consuming renovations to be able to stay in (the Wilshire location),” said spokeswoman Erin Freeman. “We decided it would be better to move into a newer, more modern location.” Insurance hub With the move, Farmers joins a host of other insurance firms that call the Warner Center area home. Anthem Blue Cross, a division of Indianapolis insurance company Wellpoint Inc., occupies a building on Oxnard Street. Health Net Inc. is headquartered close by; and Hartford, Conn.-headquartered Aetna Life Insurance Co. occupies space in Farmers Plaza. Industry watchers say that because of all this, Farmers’ move makes sense. “When the Wilshire building was built, all the insurance companies were down there,” said Pete Moraga, spokesman for the Los Angeles trade group Insurance Information Network of California. “Now, it was the only one down there. The area has changed and the industry has mostly left.” Moraga noted that the concentration has now shifted to Woodland Hills, which now has many employees familiar with the industry. Scott Silverstein, a principal at the Sherman Oaks office of Lee & Associates, who also chairs the Warner Center Neighborhood Council, said the new tenant will bring much needed density to the area. “This is a home run,” he said. “Bringing that many people into the area is a huge boost. And it’s exactly the demographics that the area was built for. With the large amount of apartments, new restaurants opening up, these are the workers we’ve been trying to attract.” But while Silverstein was excited about the move, he cautioned that the headquarters alone won’t bring vacancies up to the tight levels seen in Encino. In the mid-Valley areas of Encino and Sherman Oaks, vacancy rates have been nearly 10 percentage points lower than in the West Valley. “There are a lot of entertainment companies coming over the hill that are making the Central Valley really hot,” he said. “And I don’t know if it’s the 405 or what, but I just can’t see those companies moving over to Woodland Hills.” Farmers’ eventual expansion may also signal a return for the insurance industry after a difficult decade. Farmers has been bright spot for its corporate parent, Swiss firm Zurich Financial Services, which has owned the L.A. insurer since 1998. Farmers consistently generated revenue even as Zurich struggled in the late 2000s. Strong performance Zurich, based in Zurich, Switzerland’s largest city, reported a profit of $1.1 billion for the first quarter, lower than analysts expected. But it reported that Farmers’ business operating profits had leaped to $420 million, a 78 percent increase over the same period a year earlier. Company officials said in conference calls to investors that the strong performance was due to a focus on expense management. Farmers isn’t alone. The domestic insurance industry is picking up across the board, industry experts say. “Despite superstorm Sandy, the sector ended up doing very well in 2012,” said Mike Barry, spokesman for the New York trade group Insurance Information Institute. According to data collected by the institute, the overall net income of the insurance industry increased 73 percent in 2012, compared to the previous year. And that means growth. Indeed, Farmers has the Valley location to look to due to its $1.9 billion acquisition of rival 21st Century in 2009 from troubled competitor American International Group Inc. Most of that has come in the form of increased premiums and secondary insurance on property. And according to Jim Ryan, senior analyst for Chicago equity research firm Morningstar Inc., who covers Zurich competitors including AIG, said the industry is looking up, and he wasn’t surprised by the moves. “It’s been a mixed bag as income from premiums increased, but low interest rates mean company’s investment portfolios have struggled,” he said. “But as interest rates rise, they’re going to really bounce back.”
Insurer Bets on Warner Center
