Office Market Cools in Q1 as Prices, Volume Dip

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Office Market Cools in Q1 as Prices, Volume Dip
1463 Tamarind Ave.: Hollywood office offers free space to cannabis startups.

The average price in Los Angeles County’s office market ended the first quarter down 11 percent compared with three months earlier, $375 per square foot, according to CommercialCafé, a commercial real estate services provider.

The good news: the average price was up 34 percent year-over-year, CommercialCafé said.

First-quarter sales volume in the office market countywide fell by about 43 percent on a quarter-to-quarter basis to $1.3 billion from a red-hot $3 billion over the final three months of 2017.

About 3.4 million square feet of inventory changed hands during the January-to-March period, compared with the 4 million square feet that typically trades per quarter, CommercialCafé said.

The number of deals that closed during the first quarter fell to 21 from 29 deals in the previous quarter.

The highest number of office real estate deals was 33, hit during the third quarter of 2015 and the second quarter of 2016.

The county did see new office space come online during the first quarter – three deliveries that totaled 196,000 square feet.

Developers are clearly continuing to build smaller. Four of the five projects under construction include buildings that are less than 100,000 square feet each, CommercialCafé said.

Space for Cannabis

Cannabis blockchain technology company Paragon has announced it is giving away free co-working space to cannabis startups at its Hollywood property at 1463 Tamarind Ave., just south of Sunset Boulevard.

Marijuana has become increasingly mainstream in recent years, especially in California and other states that have made it legal for medical or recreational purposes, or both. But the drug still has a stigma – and is a banned controlled substance under federal law.

That can complicate matters for cannabis and related companies, according to a statement from Jessica VerSteeg, Paragon’s chief executive officer.

“We understand how hard it is for cannabis companies to rent office space, which is why we came up with the idea for the Paragon Space,” VerSteeg said

Potential Paragon tenants can submit a formal application on the company’s website. Paragon will choose 34, and announce them publicly announced on May 10.

Paragon purchased the 4,400-square-foot space in Hollywood using cryptocurrency – 550 Bitcoin and 8,100 Ethereum, valued at about $3.7 million – according to Lauren Bunde, a Paragon representative. Woodland Hills-based Hudson Cos. was listed as the property’s previous owner, according to CoStar Group Inc.

Paragon Space will open July 1 and will provide a lounge, outdoor area, flex desks, offices, conference rooms and a café, the company said.

Co-working spaces seem to be highly popular in Los Angeles, with WeWork Cos. Inc., Spaces and IWG PLC-owned Regus among the companies competing in this market.

Large Loans

CBRE Group Inc. has added Brad Wilmot from Goldman Sachs to the debt and structured finance team of CBRE Capital Markets as an executive vice president.

Wilmot is based in the company’s global headquarters in downtown Los Angeles, and was hired to enhance its presence in handling large commercial loans, CBRE said in a statement.

Wilmot’s career has spanned more than 25 years, with extensive experience in originating, structuring and closing loans across all major asset classes totaling more than $15 billion in commercial real estate loans, CBRE said.

The veteran worked for three years as regional director of Goldman Sachs’ Los Angeles office, where he established its real estate lending practice.

Wilmot will focus on institutional and middle market clients in the large loan space and will report to Jeff Majewski, the executive managing director of CBRE Capital Markets.

Staff reporter Ciaran McEvoy can be reached at [email protected] or (323) 556-8337.

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