Quote:
Originally Posted by ladowntowner
I'm all for increasing the density of our city's urban core (without increasing our net population) and improving our mass transit to support that density, but we should also be ripping out the idiotic fringe autocentric suburbs/exurbs and restoring the land to it's original state or at least back to agricultural uses where resources (i.e. water) are available to support it.
Let the Chinese, Asian or any other would-be immigrants stay at home (and no, I am not a racist). We have more than enough people here already, as well as an unsustainable domestic birthrate. Unchecked immigration was fine back when we were taming and building our continental, coast to coast empire, but enough is enough - it's more than built out and subdued already.
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However, alot of typical US native born ppl in LA with $$----white, latino, black or Asian-----& esp if they have kids, are still ending up in the burbs, or continue to favor hoods like SaMo instead of DT. Some of them even would rather be living up north, or in chicago, Seattle or NYC.
And the reason I have a harder time thinking of LA as so packed with ppl is cuz (1) NYC is waaayyy more crowded than we are, (2) the Northeast of the US still has waaaayyy more ppl than the southwest, & (3) there are things about DTLA that don't seem so over populated to me.
For example, are the hood's movie theaters, stores, office bldgs, condos/apts, cultural bldgs----& I'm referring to the NICE places, NOT something like Raoul's roach motel, crazy Al's liquor store or Susie Skank's strip bar----always booming & full of life? And will filling out big new condo towers like parkfifth or Concerto be a snap in the next few yrs??
And if LA is so crowded, how come we still have so many deadzones? Why is it taking so long to get rid of all the parking lots, rundown small houses & warehouses & other gaps?
Now if JDRcrash said that the immigrant to LA who's illegal & poor will help make DT zoom, I'd understand someone asking "what's he smoking?!" But if he said that more ppl, immigrant or otherwise, moving to LA who are skilled, educated & full of potential to make $$, means the bldgs described in this story would have filled up a looong time ago, I'd have to say "well, DUH!!":
Competition for L.A. Office Tenants Stays Strong
By Keeley Webster
CREJ Staff Writer
DECEMBER 10, 2007
With just a few weeks of the year left, the Los Angeles downtown and Westside office markets appear to be in a race to see which one can post the strongest numbers by the end of 2007. Downtown has the bragging rights of seeing the once nearly vacant City National Plaza, formerly known as Arco Plaza, hit 80 percent occupancy in third quarter 2007.
But the Westside saw lease rates jump by 47 percent on a year-over-year basis by third-quarter 2007, said Jeffrey Pion, an executive vice president with CB Richard Ellis Real Estate Investments. He made his remarks during a panel discussion held in Little Tokyo on Nov. 28 as part of the Urban Land Institute's Emerging Trends in Real Estate 2008 conference.
"Downtown is still 30 percent less expensive than the Westside," said Lisa St. John, a partner in Jones Lang LaSalle's Los Angeles office. "The Westside lease rates have risen so dramatically that even as downtown raised rents, they still have a 30 percent discount."
When it comes to absorption rates, downtown and West Los Angeles came in neck-in-neck. Downtown experienced 75,445 square feet of absorption, just a slight 283 square feet more than West Los Angeles in third-quarter 2007, according to the Los Angeles Office MarketView report for third-quarter 2007 produced by CB Richard Ellis.
The report had downtown's vacancy at 14 percent, although real estate watchers put the number around 10 percent. The Westside had a 6.3 percent vacancy rate, the report stated.
Kent Handleman, senior vice president for leasing at Thomas Properties, the company largely credited with the downtown turnaround with its lease-up of City National Plaza, called downtown a market in equilibrium with some submarkets resembling a landlord's market. Thomas Properties purchased the twin skyscrapers located on the southwest corner of Fifth and Flower streets in 2003 for $270 million with the aim of renewing the plaza. Subsequently, it has invested $185 million on new tenant spaces and common-area upgrades, Handleman said. The 2.7 million-square-foot City National Plaza has a full-service gym, upgraded subterranean retail offerings and two upscale restaurants on the way.
When Thomas purchased the City National Plaza in January 2003, it was 50 percent leased, but Bank of America and Arco, now owned by British energy company BP, occupied 30 percent of that space, and both were on their way out the door. Arco vacated its headquarters building during the BP acquisition, and Bank of America signed a lease to move into its current location on South Hope Street. "We had roughly 80 percent available when we embarked on our leasing program in 2003," Handleman said.
By November of that year, Thomas was able to sign City National Bank to 310,000 square feet as its marquee tenant. The bank expanded its presence by another 75,000 square feet to 385,000 square feet by 2005. The 1.5 million square feet of lease signings this year means the building no longer has large blocks of space available, Handleman said.
It also means that the large downtown tenants, who once attempted to use City National Plaza as leverage when negotiating with landlords, no longer have that option, Handleman said. That scenario also worked for Thomas Properties, which was able to convince some of those tenants with lease expirations to move into its building. "Before, we saw every single tenant deal out there, whether they were serious or not about relocating," Handleman said. "Their initial intent may not have been to come here, but to create leverage with their existing landlord. But we were able to convert some non-intending tenants."
City National Plaza still has 500,000 square feet left, but 105,000 square feet of that is super-high-end space and another 200,000 square feet is encumbered space reserved for expansion by current tenants. That leaves 100,000 square feet of non-contiguous standard Class A space, Handleman said. "If you are a 50,000-square-foot or more tenant, you can't look at our space anymore," Handleman said. "Couple the fact that our building isn't conducive to large tenants with the fact that Maguire owns eight buildings downtown and Brookfield owns three, and it's a very concentrated office market."
When tenant choices are limited they don't have the same leverage, enabling landlords to raise rents, Handleman said. At the same time, the tenants downtown are growing organically and are more concerned with expanding, not contracting, which is causing a lot of demand, he said.
Meanwhile, a number of tenants are looking for large blocks of space on the Westside, Pion said. Among those is News Corporation's MySpace, which is seeking 400,000 square feet, Pion said. There also is talk that Google is looking for 200,000 square feet. Google was expected to occupy the new 131,242-square-foot building that Maguire Properties Inc. is developing on its Lantana Entertainment Media Campus in Santa Monica, but has yet to sign a lease. Lantana is expected to open in March 2008.
Both markets compared favorably to other office markets in the Los Angeles Basin, many of which experienced negative absorption. The overall Los Angeles Basin posted negative absorption in Class A product of 306,000 square feet, but the CB Richard Ellis report attributed this to a growing tenant migration to Class B, which experienced 248,000 square feet of positive absorption.
The high lease rates on the Westside also have some tenants looking for better deals. Tenants have been driven to such areas as the South Bay and San Fernando Valley as a result of lease rates that can top $5 to $7 per square foot and are averaging $4.15 per square foot on a monthly basis, the report stated.
Most Westside brokers haven't seen those tenants scouting downtown locations, however, St. John said. "If they are truly a Westside tenant, unless it is a very large cost-conscious tenant, they don't make the decision to go downtown," St. John said. "They go up and down the Westside."
The exceptions St. John has seen are companies that have a top executive who lives in Pasadena or entities, such as law firms, that want to be near the courts.
Another draw for downtown companies that have a high ratio of administrative staff because downtown makes it easier to recruit employees with its better access to mass transit, St. John said.
Access to mass transit was a major factor in the decision of Peter Devereaux, president of Harley Ellis Devereaux, to move his architectural firm downtown. When the firm surveyed its employees, 40 percent said they would take mass transit if the firm moved downtown. "Since we are a large architectural firm, we wanted to be located where all the city agencies are," Devereaux said. "We also wanted to be in a large Class B building downtown that had expansion opportunities."
The firm relocated from a 30,000-square-foot space at 5150 Wilshire Blvd. to its current location at the Brookfield Properties-owned 601 S. Figueroa St. The 150-employee company will occupy 35,000 square feet. "I have a little bit of a longer commute because I live in Pacific Palisades, but when we did a scatter map we found our employees lived all over the region," Devereaux said. "All roads lead to downtown."
Brookfield, like Thomas, has found 2007 to be a banner year for lease signings. In mid-November it announced that it signed seven leases totaling more than 137,000 square feet at its building located at Figueroa Street and Wilshire Boulevard. Three of the leases, totaling more than 64,000 square feet, were with companies that were new to downtown. In addition to Devereaux's firm, Goodwin Procter LLP, a Boston-based law firm, and Bear Stearns, an investment banking firm, opened their first downtown Los Angeles offices to accommodate growth and to complement their Los Angeles offices on the Westside.
"People who didn't traditionally look downtown have been driven there by the quality opportunities," said John Burganski, vice president of leasing in Brookfield's Southern California region. "Overall, we have the best amenities, public transportation and office product.
"Downtown also is the only area of Los Angeles that has mass transit options, Burganski said. "Most of the mass transit in Los Angeles is focused on bringing people into and out of the central business district," he said.
"As rents hit historic highs in the Westside, we have more people taking a look and doing a careful study of downtown," Burganski said. "They are looking at where their employees are commuting from and at what kind of product we have downtown."
Brookfield has achieved 86 percent occupancy in 601 S. Wilshire Blvd. and expects to stabilize the building at 95 percent in 2008, Burganski said. The building was only 70 percent occupied when Brookfield acquired it from Trizec in 2006 as a result of a merger. Brookfield's buildings are the sort of Class A product favored by law firms, architectural firms and financial companies, but
Burganski said he could see an entertainment cluster growing up around L.A. Live, which is south of that building.
The strong job market coupled with Los Angeles' distinction as a city with nationally known universities and a growing media-technology sector have brokers like Pion bullish on Los Angeles. "Our bullishness is tied to our feeling that the fundamentals in the economy are strong," Burganski said. "We expect to continue to see a migration of tenants downtown."
For Burganski, this translates into rents creeping up from the high $30s on an annualized basis to the low $40s in 2008. For Westside owners, Pion doesn't expect asking rents in the $60 to $84 a square foot range on an annualized rate to be sustainable. "But compare that average of $36 a square foot [on an annualized basis] to New York where rents in Manhattan are $150 a square foot," Pion said.
Across Los Angeles, vacancy rates are stable at 9 percent, and average asking lease rates have increased to an unprecedented $2.76 per square foot per month or $33.12 per square foot on an annualized basis, according to the CB Richard Ellis report.
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