Culver City’s Office Market Nears Pre-Pandemic Levels, And These Tenants Are To Thank
One of Los Angeles’ buzziest office submarkets, Culver City, is home to roughly 1.34M SF of office space leased to Amazon Studios, HBO and Apple alone — and that is just clustered around the downtown area.
Apple's announcement last month about its plans to roughly double its footprint in Culver City, home base for its Apple TV+ streaming service, by adding 550K SF across two planned buildings is the latest sign that tenant demand for the office hot spot isn't letting up.
Shaking off the dust of 2020, Culver City's draw for media and tech companies is rebounding as the submarket reaches pre-pandemic levels of vacancy and rental rates. Demand doesn't appear to be slowing, and while there are more development projects in the pipeline to meet that demand, neighboring areas are seeing the benefit, too, real estate industry observers say.
“Culver City is the hottest market I’ve seen in a long time,” M Strategic Real Estate Services Managing Principal Mark Berman told Bisnow.
Although things slowed at the onset of the coronavirus pandemic, tighter vacancies drove asking rents up in Culver City, Raise Commercial Real Estate Head Of Market Analytics Petra Durnin said. The neighborhood's average asking rent was $4.61 per SF as of Oct. 29, up from $3.52 per SF at the end of 2019, Durnin said. For Class-A, newer creative office buildings, rents can reach $6.25 or $6.30 per SF, she said.
Vacancy in Culver City, meanwhile, is ahead of pre-pandemic levels. The current vacancy rate of 13.4% is down from 13.7% in 2019 and is down from the all-time high of 15.5% seen last year. Total Westside vacancy is at 15.6%, up from 12.2% in 2019.
Durnin said she expects Culver City vacancy to reach single digits in 2022.
Over the past two years, 400K SF of office space has been leased in Culver City, and an additional 350K SF of leases are in the works, Durnin said. Through conversations with other CRE firms and market intelligence, Durnin estimates that tenants are looking for about 900K SF in Culver City. There is 700K SF under construction now to help meet that demand.
Amazon, Apple and HBO are centered near the city’s eponymous Expo Line stop, and while that is definitely a cluster of activity, it isn't just the transit-oriented regions seeing the most action. Demand is occurring throughout the city, experts note, with the Hayden Tract development on the eastern edge of the city abuzz with tenant demand and TikTok choosing to plant its flag in the Fox Hills region near the southern border of the city in January 2020.
In 2015, local investor Karney Properties bought a property on Washington Boulevard across the street from an office project leased to Apple, now a hot spot within the desirable submarket. After an unsuccessful attempt to make a multifamily project financially feasible on the site, CEO Aliza Karney Guren said, the company ultimately decided to adaptively reuse the buildings as a creative office campus — not a bad option given the booming tenant demand.
The company hopes to wrap construction on the five-building, 80K SF campus in about two years, pending city approvals, Guren said.
The rents that the company anticipated in 2015 for the project were in the $2-plus per SF range, but now they are in the $5-plus range, Guren said.
Berman, who has been active in Culver City for north of three decades, told Bisnow he knew of at least eight deals in the last three months within a mile radius of Washington and National boulevards, including leases by Clayco and Participant Media totaling 40K SF at a three-building campus in the Hayden Tract.
Culver City has the type of office product in demand from growing industries — namely, entertainment, tech and streaming media — Berman said. He noted that Burbank, another entertainment office hub, has also weathered the pandemic well.
With Culver City space at a premium, spillover is happening in neighboring regions, industry professionals said, though that isn't expected to hamper demand inside the city.
“There have been few signs that demand for Culver City office space is leveling out,” Ryan Smith, executive vice president of asset management at Hackman Capital Partners, said in an email to Bisnow. “Over the past several years, nearly every new project was fully leased by the time it was ultimately delivered."
Hackman bought the Culver Studios in 2014 and is working to expand the property to over 720K SF of soundstages, production space and offices. Amazon Studios signed on to lease all the office space before the project had broken ground.
A lack of available space could push some companies to look at other nearby areas if timing is a factor, Newmark Managing Director Alex Bergeson said.
“You need the product to have the activity,” Bergeson said. “It's not a function of tenants not wanting to be in Culver City; it's just, if you need to open an office in the next 12 months, you only have a couple options right now for really big blocks of space.”
Culver City is its own city surrounded by Los Angeles proper. Some developers, seizing on Culver City’s appeal and the broader appeal of the Westside to tech and media companies, turned their attention to projects at the eastern edges of Culver City’s boundaries, in neighborhoods similarly connected to the Expo Line.
One such project, called the Wrapper, is under construction next to the Expo Line railway tracks at the southeast corner of Jefferson and National boulevards in Los Angeles, bordering Culver City. The project has been in the works for 20 years, long before the Expo Line opened or Amazon moved into Culver City.
The developer, Samitaur Constructs, is behind the transformation of the Hayden Tract in Culver City, a collection of former industrial buildings that became a creative office hub.
Los Angeles LDC President and CEO Michael Banner secured early financing for the project in the mid-2000s and worked on other deals on the surrounding blocks. The LDC, a community development financial institution, works to help stimulate revitalization and economic development.
Banner said Culver City was seen as a sleepy town 30 years ago, known mainly for the studios that were there. The renewed spark of interest in creative office conversions and the city's vast pool of hip tech tenants is in part the result of an eastward migration of demand from Venice and Santa Monica, Banner said.
“This didn’t all happen overnight, but the acceleration of it has gone crazy,” Banner said, speaking about the Culver City of late.
As a result, neighborhoods to the east — like Baldwin Hills, where Clarion’s project is, or West Adams, where CIM Group has purchased and developed a number of projects — are receiving increased attention from developers.
In February 2020, Clarion Partners and Lincoln Property Co. bought a Los Angeles office campus on Jefferson Boulevard at the border with Culver City. In March 2021, they submitted plans to the city of LA to add 300K SF of offices at the site, The Real Deal reported at the time. LPC West, Lincoln Property Co.’s West Coast arm, and Clarion Partners are also the developers of 8777 Washington, the office building at the corner of Washington and National boulevards that Apple called dibs on in 2018.
“The boundaries of Culver City keep expanding,” Durnin said. “Everybody wants that desirable Culver City address, so those boundaries keep getting pushed.”