Century City Ready For More Offices
Will creative tenants in LA follow their NorCal brethren and go vertical? (If so, we should give birds a courtesy warning.) That's one of the topics discussed by our second panel at Bisnow's Future of Century City event, covering the office market.
Our moderator, Allen Matkins' Tony Natsis, has probably repped every building in Century City in terms of leasing, management, financing, or sale. There's nothing quite like this market on the West Coast, he says. He also used to rep 20th Century Fox and "got to look at all the drawings when this was the backlot." (For a fun time, google pics of what Century City looked like when Fox owned it.)
Equity Office regional director-leasing Charlie Smith says that as Westwood and Beverly Hills tighten, it bodes well for Century City and the company's SunAmerica Center (1999 Avenue of the Stars). Whereas tenants had been shrinking, today they're renewing and "talking to us about expanding" by 5,000 to 10k SF. What's more, they want to renovate their spaces and are not afraid to spend their own capital to do it.
As part of the JMB family for 34 years, TOCO president Tom Omundson worked on 1999 AOS and Constellation Place, as well as the future Century City Center. He's optimistic about getting it through the final approvals. Having a single tower opens up the rest of the site; though some people think it's dense, "there's a lot of green space." One thing the firm has learned: The bigger the better as far as floorplates. (Office chair hockey teams could've told you this years ago.) JMB redesigned Constellation Place midstream because then-anchor tenant MGM wanted bigger floors.
With 150k SF of renewals, expansions or relocations in Century City, Newmark Grubb Knight Frank EVP Mike Arnold says many of those tenants are looking to move from West Hollywood or Beverly Hills. (We're dubbing this a Reverse Hillbilly.) Rather than expand, tenants are seeking opportunities to right-size due to higher densities, which require higher parking ratios. Mike questions the big discrepancy in rents among Century City buildings. "What's the major differentiator" between $6/SF at SunAmerica versus $3.50 for CommonWealth?
Speaking as a tenant at Century Plaza Towers, LA Realty Partners' Hunt Barnett anticipates the recap of Century Park (which includes the towers plus 2000 AOS) will cause the firm's rent to go up because taxes are going up. However, speaking as a landlord rep who is leasing against the project, this makes it less competitive, so "We actually think it's going to be helpful to us."
Noting that markets tend to imitate themselves after a while, Tony asked whether Century City would see creative tenants go vertical, as in NorCal. Hunt thinks we're seeing a little bit of that in the early stages. As we run out of large blocks in Santa Monica, or tenants get priced out, they're either going to look at Playa Vista or vertical locations farther east. Mike says a tenant who was considering going vertical in Burbank now wants to consider Century City as well.
Some of the 250 who attended our event at Constellation Place. According to Tom, Century City began as a low-cost alternative populated by big insurance firms; the buildings (except for the Towers) were just boxes. When Fox Plaza and 1999 AOS went up, the quality jumped and the tenancy changed to financial and law firms. Tony notes this is West LA, so conspicuous consumption rules. "Why do you drive a Mercedes when Audi is the exact same car?" (That sound you hear is 10,000 Mercedes drivers simultaneously googling pictures of Audis.)
At nearly every Bisnow event, someone on the panel shows individuality through their footwear. Can you guess who belongs to these?
We couldn't present great programs without sponsors like Flux Branding, a full-service marketing firm based in Downtown LA. We snapped the firm's Jamie Schwartzman and Karen Maxwell. Also a big thanks to sponsors Big Law Partners and The Atlantic Group.