December 2013

CREATIVE OFFICE SPACE “COOL BUT COULD BE VERY COSTLY”

 

As part of my transactional real estate practice, I have become very familiar with creative office space located on the Westside and downtown Los Angeles.  The first thing I notice is how different it looks from traditional office space.  The creative office area lacks private offices, is dominated by open space, high ceilings, and air conditioning ducts and various lighting fixtures suspended from the interior roof structure. The users of creative office areas believe that it stimulates thinking for its employees.  It also brings employees closer together, since there are very few permanent walls.   The concrete floors typically do not have floor coverings and are either polished or in some cases painted. The rental rates for creative office space are expensive.   These modern work areas actually exceed the cost of traditional work areas in many cases.  The Creative Office Space Owners start with an industrial building setting and convert it to office space which is expensive.  Further, the price is driven up by demand for the lack of creative office space. This new office type is not for everyone.  Medical and electronic assembly users have found that it cannot operate in this type of environment due to dust from the roof trusses and more costly energy consumption. The energy issue is one of the main concerns.  The energy utilization for HVAC systems is confined under the acoustical ceiling of perhaps 8-10’ in traditional office space  as compared to a creative office space ceiling height of up to 26’ high.   The heating and cooling is more expensive in a creative office environment, since the volume of the area is substantially greater to heat and air condition. The type of lease usually used for creative office space is a triple net form.  In a triple net lease, the tenant pays for the expenses of all the maintenance of the space.  The Landlord “may” take on the responsibility of maintaining the exterior roof.  The interior roof is almost always maintained by the tenant.  The roofs are usually wood in these higher ceilings.  Dust collects on the wood and needs to be cleaned periodically to protect the employees and their hardware.  The cleaning is expensive and cannot be done during work hours.  In addition, the wood roofs may be contaminated by termites that burrow into the wood beams and wood particles fall everywhere. I am not expressing negative views on creative office space which can be an exciting place to work.  I have just pointed out the areas that should be considered prior to leasing or purchasing this type of property.   

“I have relied solely on Lee Segal to handle the assets of two charitable trusts for the past 18 years. As a real estate broker with nearly three decades of experience, I can honestly say that Lee Segal is incredibly ethical and easy to work with, and has always done his best to represent me and my interests without interjecting his own opinions or doing anything for his own gain. His outstanding communication skills make everyone involved feel like they’ve won.” Kimberley Olson, Commercial Real Estate Asset Manager
Kimberley Olson, Commercial Real Estate Asset Manager