• Los Angeles

Tenant Migrations Show Evolution of LA Office Market

Commercial tenants in Los Angeles are on the hunt for new locations—and making some big moves as a result. From disruptive startups to media mainstays, firms throughout the region have been gravitating to new markets, with Cushman & Wakefield orchestrating some of the top deals. Downtown LA has been the focus of much of the action, as the area’s urban revival draws companies from the Westside and beyond.

The new arrivals

The recent Downtown transplants include household names along with emerging players. One of the biggest stories in LA real estate last year came from Spotify’s relocation to a new regional headquarters in the Arts District. In summer 2018, the streaming giant signed an 11-year, 110,000-square-foot lease and will swap its West Hollywood digs for the AT MATEO development repped by Cushman & Wakefield, where the tenant will join meal replacement company Soylent and the USC Roski School of Art and Design.[1]

Other occupiers have made a similar switch. After 30 years in Venice, global architecture firm JERDE made the jump to Downtown last year. Meanwhile, social media ad maker TubeScience announced in 2018 that it would transfer its operations from Santa Monica to Downtown’s Bunker Hill.

Even bigger arrivals are on the way. Warner Music Group, home to artists like Coldplay and Beyoncé, plans to occupy the historic Ford Factory sometime this year. Transferring its West Coast headquarters from Burbank, the company will bring hundreds of employees from other offices to the new Arts District location.

Signs of a shift

These tenants join a cluster of creative and digital firms that have relocated to Downtown in recent years, such as event planning platform Evite[2] and media brand mitú[3]. While the moves are far from a mass migration, they do signal an important change taking place in the local office landscape.

As Los Angeles evolves through growth and development, the region’s corporate map has started to shift as well. Certain markets have a history as hubs for particular industries—think the Westside and Hollywood for entertainment, or Silicon Beach for tech. Meanwhile, Downtown has long been ground zero for professional services, attracting tenants in finance, accounting, and law. These patterns have started to loosen up, however, as businesses become more open to planting roots in a new part of town.

Cushman & Wakefield leading the way

Local Cushman & Wakefield brokers have already taken a proactive approach, devising new strategies to help investors and landlords keep up with the trend. In an innovative move, Mike Condon Jr. and Kelli Snyder from Downtown LA have partnered with Pete Collins and Scott Menkus in West Los Angeles to create a first for the region: a fully integrated capital markets and agency leasing team that specializes in multiple markets.

Through this integration, the team works to find clients new opportunities with greater speed, precision and focus. For instance, after capital markets helps complete a property sale, the leasing team can then offer high-value tenants a sneak preview of the project before it becomes available to the public. Through this early exclusive exposure, the group can ensure confidentiality for big name occupiers who prefer to keep their requirements more discreet.

The team’s multimarket presence is key to their overall strategy. With eyes and ears in two adjacent submarkets, the brokers constantly share intelligence with each other so they can provide leasing clients with wider exposure for their properties.

For example, tenants might first approach the West LA group to find a new Westside office. However, if the tenant’s needs closely match a Downtown property that is listed with C&W, the brokers will then bring the Downtown-based team onboard. The Downtown group can then make the case for why the tenant should consider a location in a different submarket. By leveraging these relationships, the team can provide landlord clients with more leads and drive a targeted marketing process, versus a less focused, impersonal approach that relies on generic tools like online listings.

Condon says these methods reflect the team’s broader proactive mindset.

“We recognized the shift in the market and decided to act on it,” he says. “I think we are the first team that has fully adapted to the cross-market pollination that’s taking place.”

Standing out from the crowd

The revitalization of Downtown and the unique spaces available there has had a key effect on the rise in tenant migration. Of special importance is the area’s trove of historic landmarks, many of which have been repositioned by developers.

The Bradbury Building, a renowned gem of Los Angeles architecture, offers a strong example of Downtown’s growing attraction for creative tenants. Opened in 1893, the Victorian structure’s ornate sunlit atrium has been the backdrop to films like Chinatown and Blade Runner. The Bradbury, which Cushman & Wakefield represents for leasing, underwent extensive renovation last year and has since pulled in some engaging new occupiers.

Among them is Visvim, an edgy Japanese sportswear brand, which last month unveiled a new flagship retail and gallery space on the building’s first floor. ToneDen, a social marketing platform whose software helps marketers optimize social media ad buys, also recently signed a lease to relocate from Sunset Gower Studios in Hollywood to the Bradbury in an expansion of their headquarters office.

There’s also 712 S. Olive Street, a former turn-of-the-century department store now getting transformed into a creative office site. The Condon-Snyder-Collins-Menkus team, who represent the building for leasing, have already kicked off negotiations with potential tenants, including those from outside the Downtown submarket. With their rich history and design, such sites can give companies a distinctive place to house and differentiate their brand. “Some of the strongest demand in Downtown comes from these dynamic companies that are hungry for unique spaces,” explains Condon.

Condon says these buildings have particular pull among creative or tech-focused occupiers who might avoid a more standard corporate layout.

“These tenants aren’t looking for your typical office. They want something that feels authentic.”

Urban renewal

Downtown’s cultural revival is another factor. Hip new eateries, shops, galleries, and hotels have all sprouted with the local development boom, leading to vibrant scenes in food, fashion, and the arts. The  new amenities provide a clear value-add for potential tenants, as their employees and clients can now enjoy more options for dining, shopping and sightseeing throughout the district.

Pete Collins, Managing Director with Cushman & Wakefield in West Los Angeles, says the changes give Downtown a dynamic new atmosphere that appeals to tenants from other markets.

“I think companies from places like Santa Monica and West Hollywood are sensing an energy in Downtown that feels familiar,” he states. “There’s a lot of the same types of people, the same businesses that they’re used to.”

In addition, Downtown now has a budding startup scene, driven in part by a strong co-working ecosystem. All these shifts have made the district a more natural fit for e-commerce companies, digital media groups, and other occupiers that might have selected different neighborhoods in the past.

A market in transition

Though Downtown has been a focal point, other markets continue to thrive and diversify. West LA in particular has drawn its own share of businesses looking to expand or reposition.

Take international law firm Paul Hastings. Long headquartered downtown, the company recently opened a Century City office to help grow its entertainment practice, acknowledging the submarket’s position as an industry hub. The Westside also remains an epicenter for tech and innovation, which will ensure companies continue to open or relocate offices there.

Details like this help illustrate the bigger picture. The ongoing tenant migrations don’t necessarily suggest that one segment of Los Angeles has benefitted over others. Instead, they reveal a market in the midst of transition and reconfiguration, with the region’s business centers expanding their tenant profile instead of staying dominated by just a few industries.

This speaks to the larger nature of LA’s decentralized economy and geography, and the fact that multiple markets have something valuable to offer, Collins says.

“LA is such a dynamic, expansive place with all these vital hubs. It makes sense to have a presence throughout, instead of just being limited to one area.”

 

Mike Condon, Jr.
Executive Managing Director
+1 213 629 7379
mike.condon@cushwake.com

 

 

Kelli Snyder
Senior Associate
+1 213 629 6514
kelli.snyder@cushwake.com

 

 

Pete Collins
Managing Director
+1 310 595 2227
pete.collins@cushwake.com

 

 

Scott Menkus
Managing Director
+1 310 595 2211
scott.menkus@cushwake.com

 

[1] AT MATEO was repped by Cushman & Wakefield professionals Mike Condon Jr., Pete Collins, Andrew Tashjian, and Kelli Snyder

[2] Landlord was repped by Cushman & Wakefield Managing Director Andrew Tashjian

[3] mitú was repped by Cushman & Wakefield Managing Director Scott Menkus

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