• Los Angeles

Tech sector surge prompts LA’s commercial real estate industry to think outside the box

Bolstered by Technology, Advertising, Media and Information (TAMI) and coworking industries, office leasing in Greater Los Angeles surged in 2018 and the momentum is continuing into 2019. New leasing activity hit 3.8 million square feet (msf) in first quarter 2019, exceeding last year’s quarterly averages according to Cushman & Wakefield Research. Marques L. Williams, a member of the firm’s Media & Technology Practice Group in West Los Angeles, discusses how developers and landlords are ramping up their amenities and design features to attract tenants from these industries.

In the past five years, the top technology and digital media companies in Greater LA expanded their physical footprint by almost 675%, according to Cushman & Wakefield’s Tech Cities 2.0 report, released in September last year. This rapid pace of growth has spurred significant changes in several key submarkets. Some of the impact has centered on Silicon Beach, the string of startup-friendly communities running from Santa Monica to El Segundo. Yet the momentum is also spreading inland, as companies forge ahead into new areas.

Emerging urban areas such as Culver City and Hollywood are thriving as content and media hubs, where the bulk of leasing activity is happening. But there is very little supply in every size range and the supply for creative office is even scarcer. The supply and demand for tech space has been catalyzed by the competition to acquire space and talent.

To meet demand, we are seeing landlords reverse-engineering architectural and design strategies to support their objectives.

Reverse-engineering is a process in which landlords engage in detailed preliminary research to understand who the prospective end user is and how that user’s business functions prior to designing the space. Because most micro-markets in the Greater Los Angeles area support industry-specific communities, landlords are shifting away from the traditional “one size fits all” model and customizing spaces toward the needs of the industries of the area.

The model has really taken form in ground-up development and value-add development. In ground-up, landlords like Hudson Pacific Properties are preemptively designing buildings with high ceilings, architectural impact moments, and indoor/outdoor areas for large content-related users that need production areas, branding moments, and entertaining space. Value-add players like Onni Group are infusing traditional buildings with amenities and creative elements that are important to the next generation of talent in the workforce.

Top design trends take form around two primary functions – community and individuality. People need their own personal space to work and be productive just as much as they need areas to collaborate and connect.

As connectivity reduces the need to physically sit at a desk, the idea of community starts to take form in other areas in and around the building. By proactively solving for advances in technology, forward-thinking landlords and developers are much more suited to make investments that have the highest return for their tenants. They have visibility into future trends and are building communities to support these achievements.

New forms of mobility and connectivity are also important to progressive landlords because they impact the way we commute. For example, as autonomous vehicles, ridesharing and personal mobility advance, there is a diminished need for parking.

Interestingly, these trends are maturing at the same time as Los Angeles makes big investments to expand mass transit. Newer additions to the Metro rail network like the Expo Line, for example, have created more connections between areas like South LA, Downtown, and the Westside. And further extensions are soon to come. These advances in public transportation are being supplemented by ridesharing and personal mobility which help connect the region even more. Much of this process is being driven by commuters who increasingly combine multiple options to complete their trips. For instance, someone living in Downtown LA could catch the Expo Line train to Culver City, and then hop on an e-scooter for that last mile to the office. This flexible approach can actually end up being more cost effective than owning a car and paying for gas and insurance. And that gives people an incentive to drive less and own fewer vehicles, making workplace location less determined by things like freeway access or parking availability.

The rise of transportation options has been the catalyst for the growth in Downtown, Hollywood and Culver City, making these areas even more accessible for TAMI companies and their employees. However, there is a lot of room for growth in urbanized areas along the Metro lines and we could use more development around transit-oriented neighborhoods like Koreatown and West Adams. With over 3.4 msf of office space under construction and an additional 3.5 msf under renovation, Los Angeles is a sprawling market that has room to grow and to become even more connected as we develop the center of the city.


Marques L. Williams
Global Brokerage
Media & Technology Practice Group
marques.williams@cushwake.com

  • Los Angeles

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