Los Angeles’ uneven office market recovery is creating opportunities for those who know that there are always pockets of stability, if you know where to look. 

The Los Angeles office market has a tarnished reputation nationally, with some larger investors and operators avoiding or exiting the market, said panelists at Bisnow’s Los Angeles Office and Workplace Summit on Sept. 15. 

But for those who are sticking around, it’s easy to see that the reputation is not deserved in all parts of the city, which is so sprawling and fragmented that market generalizations can be inaccurate, DivcoWest Managing Director, Asset Management Jared Crowley told the audience of about 200 people at Lendlease’s Habitat development. 

“LA’s not a monolith; it’s not one thing. You can’t say, ‘How is LA doing?’” Crowley said. “That’s a really hard answer to be able to give because, frankly, we view LA as an archipelago, as a series of industry islands and talent nodes, and depending on how the underlying industry is doing, we’re seeing performance flow through into the office market.” 

Century City, for instance, is on a level of its own. Since the pandemic, the submarket is seen as safe and well-amenitized, and many tenants are moving to Century City. 

But some areas are less successful.  

“I do a lot of work in Downtown LA, and I now really understand that it is an island,” Colliers Senior Vice President Adam Tischer said. 

Downtown vacancy reached 35.3% in the second quarter, compared to 23% in Century City. Many of the high-profile moves into Century City have been firms leaving Downtown LA behind. 

“That part of the archipelago has been challenged,” Crowley said, referring to Downtown. 

In the second quarter of this year, West Los Angeles accounted for 38.4% of LA’s leasing activity, in large part due to leases in Century City. Three of the top 10 leases in that quarter — including the second-largest lease, PwC’s 138K SF deal at 2121 Avenue of the Stars — were Century City move-ins.

“It's very challenging just to bucket LA together,” Crowley added. “We are definitely seeing outsized performance in four or five submarkets.” 

The Conejo Valley areas of Westlake Village, Thousand Oaks and Agoura Hills are other promising submarkets, Own LA Chief Investment Officer Dan Tour said.

“That area has a lot of wealthy, affluent individuals and private practitioners, and they occupy those small suite spaces, have their law offices, wealth managers, accountants,” Tour said.

“That type of tenant, they’re always going to the office. They always have their offices, and they stay there long term. They're sticky. You have a lot less tenant rollover, so I like that market.”

Targeting smaller tenants who stick around for longer was not just Tour’s approach. The practice of having three or four large tenants in a building isn't common anymore, Barker Pacific Managing Principal Mark Handin said. Smaller, stickier tenants can be more reliable and often, because they aren’t moving so much, are less costly in a tenant improvement sense. 

“Now we're super-focused on a bunch of smaller tenants where the TIs can only cut so many different ways, and, as opposed to the national credit, you're getting more regional credit,” Handin said. “They're staying, and they've had their firm for 30 years, and they're not going anywhere.”

Lenders also seem to understand the importance of submarkets and individual assets within them. Handin said his firm had gone through the process of soliciting debt on an acquisition it’s working on and was pleasantly surprised to receive the attention of 20 lenders, including debt funds and banks. 

“Four of them started competing in a horse race, and we haven't seen that,” he said.