What Will Happen to SoCal's 1980s Product?

Orange County and L.A. are some of the strongest leasing markets across all disciplines said panelists on RealShare L.A.’s brokerage panel.

LOS ANGELES—The narrative has changed here in Southern California. What used to happen is that landlords and owners used to dictate taste and now tenants dictate it. That was according to panelist Andrew McDonald , senior managing director at Cushman & Wakefield, who recently spoke on a panel at RealShare Los Angeles here last week. While McDonald pointed out that Orange County and L.A. are some of the strongest leasing markets across all disciplines—with an increase of 140,000-150,000 jobs—he says that in looking at all the 1980s product out there, there is a huge fight for relevance. “We are seeing ground-up creative now and ground up that is inspiring.” So the question, he said, is what will happen to all the 1980s towers? Who is going to take the base building risk and fight and really put the money in? “There is only so much landscaping you can do to make things relevant.” Chris Cooper , principal and managing director of Avison Young , added that employers are really competing for talent and have to design space and an environment that will create a live, work, play environment to attract tenants. “But it costs money,” he said. “Will the spillover from Silicon Beach migrate to the South Bay or to L.A.’s core?” According to Cooper, it will have to be a joint partnership between ownership and the tenants. So if you aren’t knocking down the 1980s towers, what is happening, asked moderator Steve Moreira , CCIM, president of Magic Cos . McDonald said that the post war buildings in the shadows of the skyscrapers of downtown are much more desirous than the 80s buildings. “There is as much as 3 million square feet of that being renovated for office,” he said. “If it gets done, we will see. It is tricky to get the right kind of debt for that.” But the energy from tenants is there, he added, who are looking for that kind of product specifically downtown. “I think that will be a great, great story in the next five years.” And when you talk about functional obsolescence, McDonald added, “it is important to understand that tall doesn’t equal bad.” He pointed to multiple examples of momentum tenants who choose to be in tall buildings such as Twitter, Square etc. “’Creative’ can be the first 30 feet and then accessibility to street life.” At the end of the day, Avison Young’s Cooper explained, “there is going to be a continued need for these super high-rises. They have converted a few of these towers to residential, which will continue on if there is a demand for it.” Continue to check back with GlobeSt.com for more stories from the RealShare L.A. event. And click the below stories to read more. Where are we in the Investment Cycle? Richard Ziman Talks L.A., Receives Legends Award Metrics Look Good, But Wild Cards Remain How Do You Define an Emerging Neighborhood?