Office development in West Los Angeles is surprisingly low. There is currently less than 4 million square feet of office product under construction that will deliver through 2021. More surprisingly, most of that development activity is concentrated in two markets: Culver City and Hollywood. Of the approximately 4 million square feet under construction, nearly 2.5 million is located in these two market. The central location and access to transit are among the reasons that developers are flocking to these Los Angeles neighborhoods, according to Rick Buckley, principal at L.A. Realty Partners.
“Especially as it relates to Culver City, there is a tremendous focus on transit-oriented projects because traffic in L.A. is becoming more difficult over time,” Buckley tells GlobeSt.com. “A lot of the office development is following the transit lines in Hollywood and Culver City. Much of development in those markets is taking place along the transit lines.”
Transit is only part of the story—or Downtown Los Angeles would be at the top of this list. Development-friendly environments also help to drive construction activity. “There are either developable sites or buildings or development friendly areas. It is a challenge to develop in certain areas, and in other areas it is much easier,” Buckley says. The anti-development movement hasn't hit the office market, in most areas, but Buckley says that there is still community push back and difficultly securing entitlements and permits. “There are some projects, depending on location, that get some push back. It hasn't been a trend, though, really because there is not much development,” he adds.
Buckley estimates that about half of the construction projects are redevelopment projects on dated buildings. Those are often great opportunities to build creative office that will attract tech and media related tenants, which account for 60% to 75% of the activity in West L.A. “If you are going to build or redevelop something, you are probably better suited to target it more toward that type of user and then adjust if you need to,” explains Buckley. “Most of the office demand is media companies looking for creative space.”
The chief reason for the low office development, however, is availability of land. The largest office development under construction is the One Culver project at 10000 Washington Blvd. in Culver City. It is 365,000 square feet, and to Buckley, small for an office development. “For a developer to make money, you have to do it at scale,” he says. “This is a decent size project, but it isn't a huge undertaking for a developer.”
Office developers are the only people having trouble finding developable sites in Los Angeles or areas to build at scale, but they are competing with developers in other asset classes for a site. “There has been a number of sites, just based on the demand, that would have normally been office but has gone to mixed-use residential,” says Buckley.
For now, Hollywood and Culver City are fulfilling the West Side office demand, but if vacancy rates fall, office developers will need to pick up the pace to avoid supply/demand issues.
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Kelsi Maree Borland
