December 4, 2015
At Connect Westside Los Angeles, the Office 3.0 panel moderated by JLL’s Regional Director Carl Muhlstein provided a lively atmosphere, as panelists from both sides of the business shared their perspective on the market. While the speakers had differing opinions on a few subjects, all of them agreed that parking in the City of Angels is an issue, and that the available office space in the region is reaching its limits.
Muhlstein began the panel, noting, “The Westside market is at a critical turning point. There’s land-use backlash, little development ground up, and rents are rising.” With all these factors, the question resounds as to where tenants will look next.
John Ollen, managing director of leasing at Tishman Speyer, vows that tenants are willing to pay for the right product, and of the limited things that David Toomey, principal of Cresa, and he could agree on is that tenants are willing to look further than just the coastal cities for space, searching as far east as Culver City and Hollywood.
Tech and entertainment rules this city, and prospective tenants don’t seek high-rise product because they “like a casual environment that mirrors the city’s atmosphere,” noted Stephen Somer, managing director of Eastdil Secured. In a region where warehouses and low-density space once ran rampant, tenants must expand to Playa Vista and neighboring cities to find space to accommodate their business. Another major decision in choosing where to lease office space is the ability to recruit. Downtown Los Angeles, which is seeing a lot of activity, does have the labor supply to keep up with this demand, added Somer.
According to Doug Metzler, senior managing director of Hines, although regions like Beverly Hills and Santa Monica lead the way with high growth, we’re already seeing a shift towards the “El Segundo phenomenon” for some of the reasons mentioned above.
Speaking of tenant’s reasons in choosing their office space, Toomey chimed in on the hierarchy of needs. Some of the important factors they consider are: ability to recruit, office location, nearby amenities, the indoor/outdoor atmosphere, and of course, many want high ceilings as unconventional spaces are the drivers in today’s saturated market.
Despite the market’s peak, Ollen shared two positive behind-the-scenes financing factors – lots of firms have big backing by parent companies that aren’t commonly known, and the letter of credit conversation between owners and tenant representatives is becoming less difficult as they start out within a 10-15 percent differential when beginning the negotiations.
While the word “creative”office” is overused, the resounding note is that the start-up culture and next generation of workers can have their demands met, if they are open to expanding their horizons outside of the major Westside cities.