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Traffic Or Table Tennis? LA Office Pros Divided On Return-To-Office Motivators

CBRE Senior Vice President Patti Gilbert, Runyon Group Director of Real Estate Acquisition and Development Jack Nathan, Brookfield Properties SVP of Leasing for the West Region John Barganski, Kilroy Realty Corp. Vice President of Leasing Christy McRoskey, JLL Executive Vice President James Malone, and Allen Matkins Real Estate Attorney Joe Dzida.

As employers debate whether, when and how to get employees back to the office, commercial real estate professionals are divided on whether amenities installed at office properties are enough to entice people who have worked from the comfort of home for two years.

New features like golf simulators, food trucks and coffee carts are meant to incentivize a return to the office. Some are taking more drastic action like tearing out curtain walls to create outdoor space for tenants that are neither on the ground floor nor have access to a rooftop patio.

"That's what it's about: You have to create these reasons for the employee to come back in," CBRE Senior Vice President Patti Gilbert said at the Bisnow Los Angles Office Market Outlook event Tuesday.

But not everyone is convinced that these bells and whistles are worth the trouble or expense.

"All the things we're talking about don't have anything to do with work. 'Oh, you need a patio, you need coffee, you need a massage, you need a tailor to come in.'" JLL Executive Vice President James Malone said. "Go to El Segundo. I challenge everyone here to drive down Rosecrans and look at every outdoor patio and find a person. I bet you won’t." 

"It's obviously not bringing people back," Malone said. He blamed traffic for keeping workers away, and said that once traffic is improved, office attendance will too. 

The latest figures from Kastle Systems, which tracks keycard swipes in buildings across the country, show that office buildings are 44.7% occupied, relative to pre-Covid levels, the highest the number has been since before the pandemic. 

But occupancy rate increases are not guaranteed and come at a glacial pace, stymied by new Covid variants and uneven implementation of return-to-office strategies. The impact on office buildings, particularly in downtowns across the country, is beginning to show as investors seek to offload these properties, sometimes at a loss.

But not every neighborhood is the same, speakers said. Hollywood high-rises and those in downtown were highlighted by panelists as building types that were facing particular challenges. But there are always outliers. 

Brookfield Properties Senior Vice President of Leasing for the West Region John Barganski highlighted the California Market Center in the Fashion District. When Brookfield bought a controlling stake in the property in 2017 and did extensive renovations, "the investment thesis behind it was tech, media, 'creative office' use," he said. "What we didn't anticipate was the success we've had attracting fashion [tenants]." 

Adidas leased 107K SF and Forever 21 took 162K SF in the building. 

But for the most part, the companies expanding, taking up big footprints and investing in expensive amenities aimed at making the office as comfortable as an employee's home, or close to it, are rare. They are the companies that are very successful, that "don't count their money," Kilroy Realty Corp. Vice President of Leasing Christy McRoskey said. 

"The more traditional office space, it's going to take a while to catch up because the amount of money that it's going to cost for them to create that difference," McRoskey said.