The nonprofit California Watch, just shy of its second birthday, opens its new Southern California bureau today — and the location says something about the evolution of the news business.

A reporter and community engagement manager will be leaving the outfit’s Berkeley headquarters and taking up residence in the newsroom of the Orange County Register. And the rent is unbeatable: effectively, it’s free.* California Watch “rents” workspace from the Register in exchange for the Register’s use of its content, but pays nothing out of pocket.

“As traditional newsrooms have cut back, they have been left with vast stretches of open space inside their newsrooms or buildings,” said Mark Katches, editorial director for California Watch and its parent organization, making the announcement last month. “We are able to capitalize in a way that benefits our organization and our hosts.”

A couple of years ago, when California Watch was new and unknown, the outlook for this kind of team-up might not have been so sunny. The O.C. (don’t call it that) Register, for one thing, might have viewed California Watch simply as a competitor encroaching on its turf. Other reporters setting up shop here, digging for the same dirt?

No longer, though: Now, they’re teammates. (The Register already pays annual licensing fees to run California Watch stories in its own pages.) “There’s just so much news in California that, two years in, there really has not been a case where we have overlapped,” says Robert Salladay, California Watch’s senior editor. “I think that alleviated a lot of fear on the part of reporters and our partners.”

Not everyone they talked to was as receptive to a team-up as the Register, Salladay said, but at the same time, California Watch was actually getting partnership invitations from some papers. “The situation with newspapers is so critical. I think everyone’s happy for the copy, happy that stories are getting done. It is a much more collaborative industry now,” Salladay told me. “I can imagine that, 10 years ago, this model just wouldn’t have flown at all.”

The Center for Investigative Reporting launched California Watch in fall 2009 to do the kind of time-consuming, data-driven reporting that many newspapers can’t afford anymore. Since then, the site has launched its own initiatives: a statewide distribution network, a radio partnership with public broadcasting giant KQED, and a television unit that works in collaboration with WGBH’s Frontline and ABC News. In addition to more than 1,200 news posts last year, the site pumps out, on average, three investigative pieces a month, Salladay told me — and a half-dozen major series a year.

Financially, California Watch continues to subsist on grants from foundations, but the organization is raising some revenue, as well. In January, the outfit changed the way it charges for its content. Members of the California Watch Media Network — among them the San Francisco Chronicle, the Sacramento Bee, and, yes, the Orange County Register — now choose from a menu of stories each year and pay membership fees that vary according to their circulation and audience reach. (Previously, California Watch negotiated the price of each story, a la carte.) Salladay would not disclose the membership rates, but he said it can’t be so much that a newspaper can’t afford it. Newspapers’ financial struggles, after all, are the reason California Watch exists in the first place.

California Watch’s move into Southern California is overdue, Salladay said — especially because it’s where most Californians live. “One of the reasons we want to be in Southern California is that here are a lot of neglected communities that don’t get a lot of coverage, so we’re hoping to get out to some of the smaller communities to do a lot of work on low-income people, disadvantaged communities, work on the border, work on migrant farmworkers. You’d be surprised how many small towns there are down there that aren’t being watched. I think with what the L.A. Times found with the city of Bell, there’s a lot of fruitful work that can be done.”

Looking beyond Orange County, Salladay would also like to get a reporter in Los Angeles, add a border bureau in San Diego or Imperial County, and maybe hire a staff photographer. In just two years, now with 25 employees, California Watch has become the largest investigative reporting team in the state. The organization’s biggest challenge now, Salladay said, is staying on mission.

“We have to constantly remind ourselves that the mission is investigative reporting — looking at waste, fraud, and abuse,” he noted. “There’s a great temptation to pull ourselves away for some great mini-scandal somewhere or some great enterprise story about a social issue. We want to do those, but I think it’s important for us to stay focused.”

*After publishing, we added the word “effectively” here, as well as a note about the rental deal, to clarify the “free” space arrangement California Watch worked out with the Register.