By HANNAH MADANS Staff Reporter
Companies looking for large blocks of office space to relocate or grow – especially on the Westside – may be out of luck.
Brokers agree that there just aren’t that many options for these types of spaces, particularly those that are 100,000 square feet or more.
“You haven’t seen a ton of development but have seen an increase in existing tenants growing and new tenants coming out of nowhere and expanding rapidly,” said Jeff Cowan, senior managing director at Savills Studley Inc.
In the last year, there were just 14 leases signed for spaces of more than 100,000 square feet, according to data provided by Jones Lang LaSalle Inc. In 2018, three deals for spaces of more than 100,000 square feet were signed in the central business district, one was signed in L.A. North, two were signed in the Mid-Wilshire area, one was signed in the South Bay, two were signed in the Tri-Cities area and five deals of more than 100,000 square feet were signed on the Westside.
Companies that signed big leases included Bytedance, which signed a 118,975-square-foot lease in Culver City in October; Anthem Blue Cross & Blue Shield, which signed a 169,320-square-foot lease on a building in Woodland Hills in August; Honey, which signed a 130,000-square-foot lease in the Arts District in August; and Warner Bros., which signed a 415,949-square-foot lease in Burbank in May.
JLL Managing Director Josh Wrobel said a lot of this comes from a few big tenants like Google, Netflix Inc. and WeWork Cos. Inc. leasing huge amounts of space.
“The 10 biggest growth tenants in L.A. from 2012 through 2019 have 7.4 million square feet of growth,” he said.
At the end of 2017, there were 11 available 100,000-square-foot plus blocks of office space from Hollywood to Playa Vista. At the end of 2018, there were only seven, Wrobel added.
The lack of available spaces has led to preleasing, a trend where companies lease buildings months or even years away from completion.
“Historically, L.A. is not a market that preleases new development,” Wrobel said. “If you look at this last wave of new development, nearly 2 million square feet is preleased.”
In the fourth quarter, Los Gatos-based Netflix signed two high-profile leases in Hollywood for Hudson Pacific Properties’ 328,000-square-foot Epic building and for Kilroy Realty Corp.’s 355,000-square-foot Academy on Vine.
This month, Google preleased One Westside, the Westside Pavilion conversion from a mall to creative office space.
“A lot of tenants are taking more space then they need out of fear of not having expansion options later,” Cowan said.
Richard Ratner, a senior vice president at CBRE Group Inc., agreed.
“They want to secure their occupancy needs in L.A. as they see a lack of options on the landscape” Ratner said.
Cowan added that many of the companies that are preleasing are “vying for the same talent,” and it remains to be seen if large blocks of sublease space will hit the market in the future as a result of companies preleasing too much space.
Wrobel said the Tishman Speyer Properties-owned Wilshire Courtyard building, a 1 million-square-foot building that Onni Group of Cos. Ltd. is rumored to have made a $630 million offer for, is one of the few buildings with large blocks of space.
There are only about six buildings in West Los Angeles, plus a handful under construction, with blocks of space of more than 100,000 square feet, according to data provided by CBRE.
Cowan said companies with leases need to be more proactive and start looking at leases sooner than before.
“Land on the Westside is so valuable, and there isn’t a huge pipeline of development coming down,” Wrobel said.
Another solution is to look elsewhere for large blocks of space, brokers said.
Inglewood right now is the big question mark. The development by Los Angeles Rams owner Stan Kroenke of a National Football League stadium is already drawing some interest from tenants, but brokers say it’s too soon to say if companies running out of space in traditionally more-desirable markets will move to the South L.A. city. NFL Media has announced it would move its operations from Culver City to the development surrounding the stadium – dubbed LA Stadium and Entertainment District at Hollywood Park – which will have 780,000 square feet of office space.
Wrobel said the other area seeing increased interest is downtown.
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