Century City is winning the leasing game for law firms—at least compared to Downtown Los Angeles, the other major a L.A. hub for law companies. According to the annual law firm report from JLL, Century City office vacancy rates are at a historical low of 8.8% with limited availability of full-floor spaces and no new construction. By comparison, Los Angeles has a nearly 20% vacancy rate with nearly 300,000 square feet of space coming onto the market in the next 18 months.
“In terms of transaction economics, it is a simple matter of supply and demand,” Tom McDonald, EVP at JLL, tells GlobeSt.com about the Century City market. “The class-A sector of the Century City off market is slightly more than 7.7 million square feet, compared to the LA CBD's top-23 buildings, totaling 21 million square feet. Century City's current direct vacancy rate is 7.1%, while downtown's tops 21%.”
Location is a major driver of law firm leasing activity in Century City. Many who work in the sector live in West L.A. cities. “For those in the legal service sector who reside in West Los Angeles, Century City offers a significant geographic advantage over downtown Los Angeles,” adds McDonald. “Commute time, to and from home, is anywhere from thirty to sixty minutes less than traveling to the CBD. This translates into several more billable hours each week. While Century City rents are as much as $9.00 per square foot higher per year than similar quality high-rises in downtown, the annual rental difference can be made up in short order via the enhanced productivity, and therefor billable hours.”
While other Westside cities, like Santa Monica and Culver City, have become tech hubs, Century City has focused on traditional high-end office users—and it has been successful. “Leasing activity in the Century City office market is driven by both law firms and corporations whose partners and senior managers are residents of West Los Angeles,” explains McDonald. “Both Santa Monica and Culver City have been very successful in attracting tech and entertainment companies at relatively high transaction economics. On one hand, transaction economics have forced law firms, whose margins are thinner than these other industries, to remain in Century City. On the other hand, the floor plates of the Century City high-rises offer much better design efficiencies than do the large plate, low-rises in other West Los Angeles submarkets.”
Downtown L.A., on the other hand, is offering major concessions to attract law firms to the market. “Downtown Los Angeles landlords are doing everything they can by offering a historically high concession packages, which include as much as 10 months of full-service rental abatement and $100.00-plus tenant improvement allowances on 10 year transactions,” says McDonald. “The only way that we could see more Century City-based law firms prepared to consider the CBD is if rents rise to the point where law firms decide to split their Southern California presence with a smaller office in Century City and an office in Downtown Los Angeles.”
However, for Downtown Los Angeles landlords to attract law firms, they may need to offer more low rents and concessions. Law firms are looking for high-end quality space. “Downtown landlords definitely want to attract the legal service sector; however, these landlords will need to identify means other than simply lowering rents and enhancing concession packages,” says McDonald. “Typically, law firms occupy class-A high-rise space. Downtown landlords promoting creative space are doing so in class-B projects and retrofitted, historical buildings. Buildings of this character are not preferred by larger law firms as they do not offer the design efficiencies found in modern high-rises, nor do they offer immediate access to off-site amenities important to both professionals and staff.”
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Kelsi Maree Borland
