State of LA
With two all-star panels discussing the direction of the office market over the next year, we're pretty sure more people watched Bisnow's fourth annual State of the Market Summit last week than the Super Bowl after the first quarter. (Although, we admit, there were probably more people watching the ads.)
Our Summit was held in The Gas Company Tower raw space in Downtown LA. Some 450 of you attended. (We set the unofficial record for most business cards traded at an event, probably.)
Our keynote speaker, USC Lusk Center director Richard Green, discussed the connection between housing and the economy. If home builders delivered 1.5 million houses per year, the economy would be much steadier than it is, because housing leads the business cycle of life. Don't worry about a collapse in demand: By the time the Boomers retire, the Millennials will be entering their home-buying years. (And by the time Millennials retire, we'll all be living on Mars.)
Avison Young SoCal managing director Chris Cooper called for a fundamental change in how Downtown LA's high-rises present themselves to tenants and people on the street. You can't have these big, concrete monoliths where it looks like you're walking by the Pentagon or Fort Knox, he says. (It's best to not be reminded that the Pentagon is probably spying on us.)
LA Realty Partners principal Gary Weiss says the law firms he works with on the Westside are opting for single-size offices, even for partners, which translates into less space. Another trend, especially for professional service firms: more meeting areas and common areas. (Better bone up on your small talk.)
Senior managing director Jim Kruse says the goal of CBRE's new offices in Downtown LA was to have a more collaborative and effective workplace, not to reduce square footage. Studies showed the firm's previous, more traditional space was occupied only 51% of the time, and nearly 85% of the paper going into file drawers was never retrieved. (So if you've lost some forms or documents or your mother's recipe for coq au vin, you know where to look.) One rule of the firm's "free address" concept: Clean your desk off at night, because the next day, you're not sure where you're going to sit.
Cassidy Turley regional managing director Jonathan Larsen notes that many of the major studios—Disney, NBCUniversal, Fox, Sony—are moving out of leased office space into facilities they're building on their own campuses. (They need a particular type of space to not come up with new ideas.) Meanwhile, Glendale and Woodland Hills—urban parts of SoCal, too—are picking up steam for live/work/play.
Cohen Brothers Realty Corp SVP and leasing director Jeff Lasky says development on the Westside has been so limited that large tenants are forced to look at other geographies. But getting corporate tenants to spend money to build out raw space to create a brand and culture is difficult.
GRS Group director Kevin May moderated our brokerage panel. He runs business development on the West Coast for the international commercial real estate transaction and title services firm.
Chris says Brookfield now controls copious Class-A product due to its acquisition of MPG, causing some to predict rents will rise. On the other hand, REITs and institutional owners are under pressure to raise occupancy, so there could be a slight dip in rates. Gary rarely sees Century City rents dropping even in a soft market, because trophy buildings are well-leased. According to Jim, Downtown LA is getting a lot of tours from Westside companies needing tech and media space.