Los Angeles
Small office users have historically driven leasing activity in Los Angeles, but the booming tech market is changing that. According to a recent tech report from CBRE, Los Angeles is among the fastest growing tech markets in the county. Tech employment grew 13.4% in 2017 to 2018, and high-tech jobs accounted for 84.5% of all new office jobs in the market. This places the city at number 11 in the nation for tech job growth.
"There is a continued convergence of media and technology companies. With the entertainment industry based here, we are seeing more technology companies establish a larger presence," Rob Waller, EVP at CBRE, tells GlobeSt.com. "There are companies coming in from Seattle and Silicon Valley, and we think that is a trend that is likely to continue as the proliferation of new content continues. That includes both new and traditional content, and so there is broad-based demand across the board."
The job growth is also supported by a solid talent pool, fed by a robust university system. This has created a positive growth cycle, where jobs attract talent and talent attracts jobs. "Los Angeles historically has been a net exporter of intellectual capital, and there is tremendous intellectual capital that matriculates from the universities here on an annual basis," explains Waller. "Rather than a lot of those people going to New York, Seattle or San Francisco, a lot of them are electing to stay here. The job growth that we have seen is allowing them to do that."
The market growth has, of course, driven office leasing. Office rents have increased 11.1%from Q2 2017 to Q2 2019. It has also created a new dynamic mix of office users. "These companies have absorbed very large blocks of space. Historically, Los Angeles has been a small tenant market, and now, we are seeing users come in and take a couple hundred thousand square feet at a time," says Waller. "That has gobbled up a lot of large blocks of space, and now there are fewer opportunities. It is straight forward supply and demand."
These companies are landing in the usual places, the Westside as well as Downtown Los Angeles. "As traffic becomes more challenging, tenants are electing to locate in markets with public transportation, like Santa Monica, Downtown, Culver City and West Hollywood," says Waller.
Affordability can also not be overlooked. The Los Angeles market is also a value compared to more mature tech markets, while still offering the benefits of a major metro. "A lot of people that are graduating from across the country, Los Angeles is considered a desirable place to be, and that is having a positive impact on overall job growth," says Waller. "On a relative basis, commercial and residential real estate is less expensive."
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Kelsi Maree Borland
