All that buzz you’re hearing about downtown Los Angeles? It’s starting to make a positive difference for the prime office market.
The area absorbed 323,407 square feet of space during the first quarter, retaining most major tenants and attracting several large ones. The vacancy rate dropped a full point to 15 percent compared with the previous quarter.
“What’s going on downtown is awesome,” said Fernando Villa, partner in the real estate division of law firm Pircher Nichols & Meeks. “It has the potential to continue to transition into an entertainment engine for downtown and for the region.”
What’s going on, of course, is talk by downtown-based sports and entertainment company AEG of building a pro football stadium and event center on a current section of the Los Angeles Convention Center. In addition, plans are moving forward on an art museum to be built next to the Walt Disney Concert Hall.
Then there’s the $1.2 billion redevelopment of the Wilshire Grand hotel into 1.5 million square feet of office space, 650 hotel rooms and up to 100 condos – a plan approved by the City Council in March.
There also have been smaller moves, such as Target Corp.’s announcement that it will move into the space vacated by Macy’s at the 7th +Fig complex.
Another driving force behind the market’s good numbers is the relative value of office space. Class A asking rents dropped 3 cents to $3.13 from the previous quarter, and 14 cents from a year earlier. That’s cheaper than Century City and Santa Monica, which compete for top legal and other professional firms.
“Certainly companies are looking at how downtown is priced compared to other submarkets,” said David Rifkind, principal and managing director of L.A.-based real estate investment banking firm George Smith Partners.
Most notable of those tenants are a number of law firms that have been slowly flocking back to the area, with Haight Brown & Bonesteel LLP making news when it announced an intention to relocate to City National Plaza from Marina del Rey’s Howard Hughes Center. (See article page 21.) Architecture firm Gensler also is moving in from the Westside.
Downtown still faces big challenges, such as poor parking and high homelessness rates. But some think the stadium could cement the area as the county’s leading business district.
“Obviously, AEG and the stadium have huge potential to change the downtown story,” Rifkind said. “If that continues to progress, it changes everything.”
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