Commonalities Among Three Skyline Office Markets

Gonor: “Landlords of Skyline buildings are understanding what tenants want today and are taking action to renovate lobbies, improve and expand on the amenity base and differentiate themselves from commodity options.”

SAN DIEGO—Landlords in Los Angeles, Orange County and San Diego are taking similar steps to attract and retain tenants in their skyline office buildings. GlobeSt.com spoke exclusively with JLL executives Jeff Ingham , senior managing director in Orange County; Richard Gonor , EVP in San Diego; and Josh Wrobel , managing director in Los Angeles, about these tenants and future trends in this product type. GlobeSt.com: What are landlords doing to attract and retain tenants in skyline buildings in today’s competitive market? Ingham: Landlords in Orange County are updating common areas and office suites, which includes creating outdoors communal space, revitalizing lobbies and adding health and wellness services. Gonor: Landlords of San Diego’s skyline buildings understand what tenants want today, and many are taking action to renovate the common areas, improve on the amenity base and offer non-traditional build-outs in order to differentiate themselves from the commodity options. Modern lobbies, outside decks/patios, conference centers, new gyms, new retail amenities and refreshed common areas have either been recently completed or are planned in several of the buildings. Additionally, landlords are understanding their assets position in the market and are adding unique features to further enhance the overall appeal and character of the building to its target market, such as game rooms in otherwise obsolete basement space, murals, bike-sharing programs, wetsuit lockers and EV chargers. Wrobel: Landlords of L.A.’s skyline buildings are taking a variety of unique steps to attract new tenants to their projects. First off, albeit by no means unique, many landlords are following the old adage of “it takes money to make money” and expending significant resources to renovate lobbies and common areas to improve the overall appeal of their projects. In the past half-decade alone, Downtown Los Angeles landlords have spent well over $200 million on lobby and common-area upgrades and renovations. Lighter and brighter lobbies, outside decks and upgraded common areas and retail amenities have been the norm, but now some owners are taking the unique approach of finding “hidden” unique space in their projects to unearth creative new spaces. Downtown Los Angeles owners have converted ground floor spaces, under-utilized storage spaces and “extreme” mechanical floors to create “hidden gem” spaces that can rival the most creative spaces in the country. GlobeSt.com: What types of tenants and industries are most likely to lease space in skyline buildings? What new industries are new to skyline buildings? Ingham: Financial services , law firms and consulting tenants are most likely to lease space in Orange County’s skyline buildings. New industries include gaming and creative co-working . Gonor: The skyline buildings in San Diego are largely occupied by legal, government and financial-services companies. However, there has been a growth in technology and design-related uses. There’s also a handful of co-working groups that are looking to enter the San Diego market: digital media, cybersecurity and app development. Wrobel: If you are looking at the skyline projects in downtown Los Angeles and Century City, historically a bulk of the tenant base was from financial, insurance and legal industries. In recent years, the skyline buildings have experienced a growth in creative tenants such as a flood of architectural and engineering firms, entertainment and agency firms, as well as a growing number of technology , fashion and design tenants. The aforementioned industries have provided the bulk of the new absorption into the skyline markets over the past two to three years. GlobeSt.com: How important is creative space to the success of a skyline building and why? Ingham: Although there isn’t tremendous overlap between tenants interested in both creative space and skyline buildings, skyline landlords are looking to attract from a larger industry pool. In order to attract these tenants, landlords understand they need to offer greater onsite amenities than they previously did. Gonor: Skyline-building owners use creative space to differentiate themselves from commodity options, appeal to the changing workplace strategies and help tenants recruit and retain talent. Wrobel: Ultimately, creative space is extremely important to the success of skyline buildings since a vast majority of the growth in absorption in the Los Angeles Basin has comes as the result of in the growth in the tenancy of entertainment, new media and technology tenants  Historically, these tenants have dipped their toes in the skyline markets of Century City and Downtown Los Angeles, but to experience exponential growth, the skyline markets are going to have to attract creative tenants and the unique and creative spaces provide interesting bait to draw the attention of these tenants. GlobeSt.com: What trends in skyline buildings will we be talking about in two years? Ingham: The requirement for parking will ultimately reduce over time, and we will start seeing some impact of this new trend in driverless technology in two years. Gonor: We’ll be talking about bridging the gap with hospitality and the addition of services and executive perks like concierge services and tenant lounges. Wrobel: As skyline markets continue to add new and interesting creative spaces, I believe that one of the trends will be for the owners of these projects to aggregate these “creative environments” to break the perception of their market being stuffy or lacking in creativity. Eliminating this perception is key because in reality, the skyline markets tend to be a hub for the lifestyle opportunities that the younger workforce desires (i.e., access to unique and diverse housing opportunities, proximity to rail and a car-free environment, access to world-class restaurants and entertainment, etc.). Ultimately, the more exposure the creative spaces (and specifically, the “hidden-gem” creative spaces) are given, the reality will start to overcome some of the historical negative perceptions. Finally, I believe that another key trend in skyline buildings will be how the owners of these projects market one of the key advantages these markets afford: density. With density come unlimited amenities and entertainment opportunities, and revamping “concierge” services and programs to promote these amenities will be a significant trend in the years to come.