There has been much effort in the last few years to attract more office tenants to Downtown Los Angeles. While the most recent report from the DCBID shows that the office vacancy rate is declining, at 17%, it is still one of the highest in the greater Los Angeles area with a large amount of high-rise office space available. Olive Hill Group recently renovated a small office property adjacent to Pershing Square. While it is surrounded by high-rises, tenants have shown strong interest in the smaller size of the property.

“There is demand in Downtown L.A. for smaller spaces and smaller buildings where people can get in and out very quickly, and where tenants don't have to pay the high maintenance fees that you have to pay in a larger, 50-story building,” Tim Lee, VP of corporate development and legal affairs at Olive Hill Group, tells GlobeSt.com. “A lot of the tenants that we are talking to want to be in Downtown Los Angeles because there are a lot of great housing options here, but they don't want to pay sky-high rents.”

The rent in the smaller space is the biggest incentive. Lee says that the rents in his building are $2.50 to $3 per square foot. While he didn't estimate the rental rates for the surrounding buildings, the recent DCBID report says the average rental rates in Downtown Los Angeles are $3.50 per square foot. One reason for the savings is the expense of the common spaces in large buildings. “You are subsidizing the common area space that a law firm or a national accounting firm is using,” says Lee. “At our building, it is a smaller and much more closely knit community. We are activating the retail space and changing it over to a new look and feel.”