We Need 44 Million SF of Creative Office

Petra Durnin is the director of research and analysis for the Southern California market at CBRE.

LOS ANGELES—The Los Angeles market should be ramping up for huge creative office demand in the next few years, according to a new creative office report from CBRE . If the last few years are an indication—creative office leasing is up 91% since 2011—the market will likely have 44 million square feet of demand for creative office space in the next few years. Growth in the creative office market is inherently linked to the general office market, which has also saw some growth in the most recent quarter, and growth in the overall office market is driven by the creative sector. “They are becoming one in the same,” Petra Durnin , head of research and analysis for Southern California at CBRE, tells GlobeSt.com. “New construction over the next five years will look very different than new construction from the previous 25 years. Add to that the renovations and upgrades to some type of creative/open space expected over the same time period and it will be difficult to separate out the growth.” Along with being linked in terms of growth and demand, the definition of creative office is also changing, especially as more and more traditional office users want creative-type spaces. “It is becoming blurred,” says Durnin. “More and more traditional tenants are renovating spaces to incorporate better design and technology to support collaboration, connectivity and wellness and the driver is much more important than having cool space. More companies are realizing they can’t attract and retain talent with tired or conventional space. Low ceilings, unnatural light, and confining walls are major deterrents.” The popularity of co-working spaces adds yet another layer to the creative office phenomenon, which are providing an incubator for start-up companies. The CBRE report estimates that start-up growth alone will creative 4.8 million square feet of demand in the next five years, while today, 1,900 new start-ups are coming to the region. Co-working spaces are helping to fill the gap. Between 2014 and 2015, the presence of co-working spaces increased 14.2%. “Co-working in a way is more of a stepping stone to permanent creative space,” adds Durnin. “As teams and small companies outgrow co-working spaces, they could and often do move into their own creative office digs.” This is a huge amount of growth for the L.A. market, but Durnin said that much of the needed product will come through renovation, not ground up development. “The product is largely already here. As tenant leases expire, traditional spaces will be redesigned to reflect evolving needs,” she explains. “Underutilized product can be renovated and become useful again in such neighborhoods as Downtown and the West Side, for example. Look what CBRE did in Glendale at the Masonic Temple. We renovated a completely obsolete, pretty much unusable building and transformed it into a state-of-the-art office space. New product will likely push the envelope the most with exciting design, high-end connectivity, programming and amenities.” Currently, there is 2.3 million square feet of creative office construction in the Los Angeles market, and is mainly in the Hollywood, Playa Vista and Culver City markets.