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Office-to-industrial conversions are becoming more commonplace in some parts of Southern California, but the reverse continues to occur in Downtown LA’s Arts District.
Local investor Wilshire Capital Group bought a roughly 36K SF industrial building at 1736 and 1738 Industrial St. with plans to convert the site into a creative office, according to CoStar.
The building, situated on a nearly 0.7-acre site, traded for $15.5M. The deal works out to $430.91 per SF, the third-priciest sale on a SF basis for the neighborhood since December 2019, according to CoStar.
Cushman & Wakefield Executive Director Brandon Burns, who represented the seller, Industrial Street LLC, told CoStar the property is slated for creative office conversion. The property was built in 1923 and is located just south of the under-construction Sixth Street Bridge.
The modern Arts District is a neighborhood built on repurposing industrial buildings, whether as offices, housing, breweries or art galleries. Office space in the neighborhood was in high demand prior to the coronavirus pandemic, driven by tech and media companies, some of which bought or leased former industrial sites. Notable examples include Warner Music Group’s purchase of a former Ford manufacturing plant, which it turned into offices, and online coupon company Honey's lease for 130K SF in a one-time Coca-Cola plant.
Tech and media tenants have given a post-pandemic boost to LA-area submarkets like Culver City or Burbank’s Media District.
This year, the Arts District has continued to see steady activity. In Q1, Yeezy Gap, a collaboration between Kanye West and The Gap, leased 57K SF on Sixth Street in the Arts District. In May, San Francisco-based SteelWave bought The Switchyard, a 150K SF creative office campus near the Fourth Street bridge, for $80M.
Still, the region is struggling with vacancy rates. A Q3 2021 report from Cushman & Wakefield indicated the neighborhood has 846K SF of direct vacancies, with an overall vacancy rate of 43.2% — the second-highest vacancy rate of the eight Downtown neighborhoods the report looked at, including the city’s central business district neighborhoods. The Arts District did see nearly 91K SF of leasing activity during Q3, the most of any non-CBD neighborhood in Downtown, with an estimated 214K SF of offices under construction.
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