Creative Office No Panacea for Landlords
There is so much information in the news regarding the major tech companies leasing large quantities of creative office and Research & Development (R&D) space. However, what we don’t hear about is all the creative office space available. For example there are many large beautiful creative office space buildings that are sitting empty in Santa Monica, El Segundo, Playa Vista, downtown and all over Los Angeles County.
The Pen Factory located at 2701 Olympic Boulevard in Santa Monica opened in 2017 with 222,000 square feet of creative office space. They leased 90,000 square feet when it opened; however, they still have a 132,000 square-foot building sitting empty. The available space divides into two units.
The Los Angeles Times reported “Growth among Los Angeles-area companies, especially those in fields related to technology and entertainment, kept the office rental market stable last quarter,” according to Journalist Roger Vincent on April 13, 2018.
The article went on to say; “data shows that El Segundo is a popular city for technology companies to move into office space. In 2011 the vacancy rate in El Segundo was almost 20%; however, it had fallen to 6.9% this year first quarter.”
The famed Architect Frank Gehry is building an 80,000 square-foot creative office building called Ascend located at 2330 Utah Avenue off Aviation Boulevard in El Segundo. It is located on the Utah Avenue Campus which has two creative office buildings totaling 200,000 square feet. One 43,573 square-foot building is completely leased, according to Jason Fine, a leasing agent at Ascend. The second 152,107square-foot building has about 100,000 square feet leased with 53,000 square feet available still. The buildings were previously owned by Xerox and converted to creative office in 2015.
The Ascend building that Frank Gehry designed will be available in July; however, all 80,000 square feet is available to lease. They have been marketing it for about a year, Fine said. The space is divisible to 40,000 square feet.
The Class A Office Space Market is healthy, Fine said. Companies are moving to El Segundo, because the city has no gross receipts tax, it is close to the beach cities and 405 and 105 freeways. In addition, El Segundo is close to Playa Vista which just developed a massive new apartment and housing project. El Segundo is also on the Metro Green Line.
A lot of other buildings are being converted in the El Segundo area. In addition, there will be more building owners converting industrial to creative in the El Segundo Smoky Hollow District. The City Planning and Safety Department just announced they are finalizing the Smoky Hollow Specific plan. Smoky Hollow is a light industrial area on a 120-acres located one mile East of Dockweiler Beach between El Segundo Boulevard, Main Street and Sepulveda Boulevard, with residential homes on the North.
The Planning and Building Safety Department is rezoning the area from mainly light industrial to office and R&D space with some commercial. In addition, they are adding, parking structures, bike lanes, and making it more pedestrian friendly with crosswalks. They are also adding street furniture, plants and art on new sidewalks.
As a result, developers will be converting the light industrial buildings to creative office space; however, it will be on a much smaller scale than the Utah Avenue Campus. The larger buildings such as the Ascend at Utah Avenue Campus are geared for growing tech and entertainment companies that have outgrown their current space and need larger space than what they were leasing.