977 N. Broadway, Chinatown.

977 N. Broadway, Chinatown.

The Los Angeles office market was cruising in high gear — until the coronavirus hit.

More than $7 billion worth of office properties sold in L.A. in 2019, according to data from Newmark Knight Frank. And the first few months of 2020 brought a large number of high-dollar sales.

In a sign of the market’s strength, those transactions were not isolated to just a few areas of Los Angeles County. For the six-month period from Oct. 15 to April 15, CoStar Group Inc. records show the top 10 office sales were spread throughout the area.

Before March, when the impact of Covid-19 began to be felt in the marketplace, there was a “direct correlation between our strongest demand for office properties and the markets that have the strongest leasing fundamentals,” Andrew Harper, a managing director at Jones Lang LaSalle Inc., said in an email. “These markets include the West Side (including Culver City and Media Mile), Hollywood, portions of the Tri-Cities and El Segundo.”

Many investors were focused on value-add properties, he said.

The top sale during that period was 5900 Wilshire Blvd., a 32-story skyscraper in the Miracle Mile area. Rockpoint Group purchased the property from PGIM Inc., AXA Equitable Life Insurance Co. and Ratkovich Co. for $312 million. SBEEG Holdings Licensing, known as SBE, vacated the top two floors recently.

Several of the office sales in the last six months were on the Westside, particularly in and around Culver City.

Kilroy Realty Corp. purchased the 158,000-square-foot Blackwelder Campus from Lincoln Property Co. for $186 million. The campus is in West Adams, near Culver City.

And the Jefferson Creative Campus, in Palms near Culver City, sold for $169 million. Clarion Partners and Lincoln Property Co. purchased it from Rader Properties Group and Rodeo Properties.

And in Culver City itself, the 76,000-square-foot Westside Business Park sold for $73.5 million. Redcar Properties purchased the site from Lionstone Partners.

Other large sales happened in Burbank, Hollywood and downtown.

Nick Griffin, executive director of the Downtown Center Business Improvement District, said interest in the area has increased in recent years because of a greater diversity of tenants in the market.

“I feel like we are just at a tipping point of an increasing growth in leasing downtown, and that’s why investors are looking at it as a strong opportunity,” Griffin said.

Changes coming

Experts warn not to expect many big sales in coming months, though, as the market downshifts during the coronavirus pandemic.

Office leasing has slowed, vacancy rates are rising, and sublease space is expected to come back to the market, according to CBRE Group Inc.

The group said markets with lots of oil, gas, travel and leisure jobs will be especially affected.

“We are just beginning to see the full extent of disruption from this pandemic, and the second quarter will be very tough for commercial real estate and nearly all other industries,” CBRE Global Chief Economist and Head of Americas Research Richard Barkham said in a statement.

He added that it would likely take several years for vacancy rates to return to where they were before Covid-19 hit.

The other big question is how many people will continue to telecommute rather than go into an office.

“With the current situation, on the one hand I’m sure we will have some increase in the number of folks who now feel like they can telecommute, and that’s perfectly healthy,” Griffin said.

“That’s going to be viable for certain companies, but one of the things we are seeing in this crisis is the real premium that people put on community and being able to engage with people, and that is where a city center like downtown really excels,” he added.

Harper said it was too early to know the full effect Covid-19 will have on the office market, “but investors are reevaluating underwriting assumptions. As it currently stands, investors are shying away from taking assets to market until they find clarity in underwriting and the capital markets.”

“We have entered the current disruption with the most amount of dry powder in history,” he added. “So, most investors are actively looking for opportunities. Some are ready to enter into the market now, but many are moving slowly and cautiously. Among the potential trends, we expect there to be a flight to quality toward assets with strong tenant credit and term.”

Top 10 Office Property Sales in LA County

(For the six-month period from Oct. 15-April 15)

1. 5900 Wilshire Blvd.

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5900 Wilshire Blvd.

Notable: The building counts LACMA as a tenant.

Address: 5900 Wilshire Blvd., Miracle Mile

Buyer: Rockpoint Group

Sellers: PGIM Inc., AXA Equitable Life Insurance Co. and Ratkovich Co.

Price: $312 million

2. Blackwelder Campus

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CoStar Group Inc.

Blackwelder Campus at 3101-3243 La Cienega Blvd., West Adams.

Notable: The campus, which includes 158,000 square feet of office space across 19 buildings, was 100% leased at the time of the sale.

Address: 3101-3243 La Cienega Blvd., West Adams

Buyer: Kilroy Realty Corp.

Seller: Lincoln Property Co.

Price: $186 million

3. Jefferson Creative Campus

photo

CoStar Group Inc.

Jefferson Creative Campus at 5870, 5880 and 5890 Jefferson Blvd., Palms.

Notable: The Jefferson Creative Campus, also known as the Jefferson Palms, sits on roughly 7 acres.

Address: 5870, 5880, 5890 Jefferson Blvd., Palms

Buyers: Clarion Partners and Lincoln Property Co.

Sellers: Rader Properties Group and Rodeo Properties

Price: $169 million

4. 111 N. Hollywood Way, 3903 W. Olive Ave. and 4001 W. Olive Ave.

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CoStar Group Inc.

111 N. Hollywood Way, 3903 W. Olive Ave. and 4001 W. Olive Ave., Burbank.

Notable: The three office buildings comprise more than 330,000 square feet. They are leased to Warner Bros.

Address: 111 N. Hollywood Way, 3903 W. Olive Ave. and 4001 W. Olive Ave., Burbank

Buyer: Stockbridge Capital Group

Seller: Warner Bros. Entertainment Inc.

Price: $147.8 million

5. Westside Business Park

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CoStar Group Inc.

Westside Business Park at 10301-10395 Jefferson Blvd., Culver City.

Notable: The three-building campus totals 76,000 square feet.

Address: 10301-10395 Jefferson Blvd., Culver City

Buyer: Redcar Properties

Seller: Lionstone Partners

Price: $73.5 million

6. The Telephone Building

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CoStar Group Inc.

The Telephone Building at 1314 7th St., Santa Monica.

Notable: DivcoWest Real Estate Services sold its interest in the historic Telephone Building in Santa Monica to an affiliate of Rockwood Capital.

Address: 1314 7th St., Santa Monica

Buyer: Rockwood Capital

Seller: DivcoWest Real Estate Services

Price: $65.7 million

7. Wilshire Medical Center

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CoStar Group Inc.

Wilshire Medical Center at 6200 Wilshire Blvd., Central L.A.

Notable: The building is roughly 113,000 square feet.

Address: 6200 Wilshire Blvd., Central L.A.

Buyer: Crescent Heights

Seller: Wilshire Center Building

Price: $54.3 million

8. Security Pacific Building

photo

CoStar Group Inc.

Security Pacific Bldg. at 6381 Hollywood Blvd. and 1724-1726 N. Cahuenga Blvd., Hollywood.

Notable: The sale consisted of a historic office building and a surrounding retail building and

parking lot.

Address: 6381 Hollywood Blvd. and 1724-1726 N. Cahuenga Blvd., Hollywood

Buyer: Onni Group

Seller: W.R. Johnston & Co.

Price: $53.2 million

9. 977 N. Broadway

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CoStar Group Inc.

977 N. Broadway, Chinatown.

Notable: The building, which is more than 64,000 square feet, is expected to become the buyer’s headquarters.

Address: 977 N. Broadway, Chinatown

Buyer: Los Angeles City Employees’ Retirement System

Seller: Pacshore Partners

Price: $33.8 million

10. 415-417 N. Camden Drive and 152-160 Lasky Drive

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CoStar Group Inc.

415-417 N. Camden Dr. and 152-160 Lasky Dr., Beverly Hills.

Notable: The two buildings offer a combined space of roughly 29,000 square feet.

Address: 415-417 N. Camden Drive and 152-160 Lasky Drive, Beverly Hills

Buyer: An individual

Seller: A trust

Price: $32.8 million

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