After years of being tightly shut, the spigot for speculative office construction appears to be opening gradually in the Los Angeles area.
The latest in a spate of speculative office projects to be announced in recent weeks is a 35,000-square-foot project near Malibu Civic Center, to be called Malibu Professional Park.
Demand for office space in Malibu is so strong that the vacancy rate is only 2 percent, according to Barry Beitler of Brentwood-based Beitler Commercial Realty Services, which will handle leasing for the project.
Although the planned office building is small, Beitler said its development is significant as the latest in a series of office projects announced for the Los Angeles area. The activity suggests that the office markets in the Los Angeles area have finally recovered enough that lenders will finance and developers will take a gamble on speculative construction.
Transpacific Development Co., for example, broke ground July 1 on a 50,000-square-foot speculative office project at Cerritos Towne Center. Other projects announced recently include a 500,000-square-foot project in Glendale that PacTen Partners of Los Angeles plans to break ground on Aug. 7, and a 130,000-square-foot project in Santa Monica called the Arboretum Courtyard that owner and developer Spieker Properties of Menlo Park expects to break ground on in September.
Spieker has been one of the most active real estate investment trusts in the Los Angeles area. Last week, the company closed the latest of several acquisitions in the L.A. area this year the $19.4 million purchase of the 150,000-square-foot McKesson Building on Foothill Boulevard near Sierra Madre Villa in Pasadena.
Seller HML-Britel Inc. and its advisor San Francisco-based RREEF Funds were represented by Cushman & Wakefield in the deal.
Craig Vought, chief financial officer at Spieker, said the REIT obviously believes now is the time to buy in L.A. because it has bought a number of office properties here recently. The purchase price of the McKesson Building works out to $128 per square foot, less than has been paid for some other suburban L.A.-area office buildings this year, Vought said, but more than the building might have commanded not too long ago.
Broker Beitler, whose firm represented El Segundo-based REIT Kilroy Realty Corp. in its recent $31.2 million purchase of the Sony Music headquarters campus in Santa Monica, said REITs are a big reason office building sales prices have been rising. REITs have plenty of money and are raising more, and they are often bidding against each other for buildings, driving up prices.
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