Los Angeles Office Market Trends

The Los Angeles office market is witnessing significant trends, with two recent deals highlighting the differences between downtown and Silicon Beach. A creative office building in Venice, occupied by Google and designed by Frank Gehry, was sold for $39.6 million, or about $500 per square foot. In contrast, an office tower on Bunker Hill, owned by Brookfield, which has defaulted on over $500 million in debt, may be sold for $180 million, or about $130 per square foot.

Downtown LA’s Office Market Struggles

Downtown LA’s office market continues to face serious problems, raising questions about its future as a commercial hub. The area has been struggling for some time, making the potential sale of a Class A tower on Bunker Hill at a bargain price unsurprising. The $500-per-square-foot sale of the iconic Binoculars Building in Silicon Beach serves as a reminder that Southern California is still adjusting to its new normal. Industry experts estimate that the property would have sold for $1,000 per square foot before the pandemic, indicating a significant reset in the market.

Recent Deals

Here are the key details on the recent trade in Silicon Beach and the pending deal on Bunker Hill:

• Silicon Beach trade: The Luzzatto Company purchased the three-story, 79,000-square-foot property at 340 Main Street, where a pair of 45-foot-tall binoculars stands, from a W.P. Carey spin-off. Luzzatto received a $24 million loan. The city transfer tax, which includes a special tax via Measure ULA, amounted to more than $2 million.
• Downtown deal talk: 601W is in talks to purchase the mortgage loan on 333 South Grand Avenue, which encompasses Wells Fargo Center — North Tower and the retail spot connected to it, owned by Brookfield, for $180 million, knowledgeable sources said. The deal has not closed, according to an informed source. It appears to be lender-facilitated, and the buyer could then do a deed in lieu of foreclosure.

Some Studio Solace

Hudson Pacific Properties, Vornado Realty Trust, and Blackstone — the joint venture partners behind the just-opened Sunset Pier 94 Studios — recently announced a significant tenant, Paramount Television Studios, which leased 70,000 square feet to film the second season of Dexter: Resurrection. This accounts for 30% of the 232,000 square feet of leasable stages, production support space, and offices. This is a strong start for the new space, especially compared to Blackstone and Hudson Pacific Properties’ Sunset Glenoaks, which is only 8% leased.

Fly Away

The $45 million debt on a Marriott-branded hotel, a half-mile away from LAX’s entrance, moved to special servicing for imminent monetary default, according to Morningstar. The hotel, at 5933 West Century Boulevard, appears to be owned by Seaview Investors, which lists the real estate as part of its portfolio online. Seaview’s chief executive, Robert Alter, is the named loan sponsor, per Morningstar.

Read More

For more information on the Los Angeles office market, check out the following articles:

• Deal for Brookfield-owned DTLA office tower in works at $180M: sources
• Google-occupied Venice office building trades for $40M

Conclusion

The Los Angeles office market is experiencing a significant shift, with downtown LA struggling to recover and Silicon Beach showing signs of resilience. The recent deals in these areas highlight the differences in their market trends and the impact of the pandemic on the office market. As the market continues to evolve, it will be essential to monitor the sales of office towers in downtown LA and the performance of new studios and hotels in the area.

FAQs

• What is the current state of the Los Angeles office market?
  The Los Angeles office market is experiencing a significant shift, with downtown LA struggling to recover and Silicon Beach showing signs of resilience.
• What was the sale price of the Google-occupied Venice office building?
  The Google-occupied Venice office building was sold for $39.6 million, or about $500 per square foot.
• What is the potential sale price of the Brookfield-owned DTLA office tower?
  The potential sale price of the Brookfield-owned DTLA office tower is $180 million, or about $130 per square foot.
• What is the occupancy rate of the Sunset Glenoaks studio?
  The Sunset Glenoaks studio is only 8% leased.
• What is the status of the Marriott-branded hotel near LAX?
  The $45 million debt on the Marriott-branded hotel near LAX has moved to special servicing for imminent monetary default.