Roku Plants Roots in Santa Monica With 10-Year Lease Deal

In a win for the office market, entertainment tech company Roku has signed a major lease in Santa Monica. The company inked a 10-year deal with Boston Properties for a 72,000-sqaure-foot space at Colorado Center, a 1.2 million-square-foot class-A office complex.

The deal rings of pre-COVID office lease transactions. In a statement about the transaction, Roku’s director of global real estate said that the space provide an environment for employees to “connect, collaborate, and innovate,” while BXP’s SVP of the Los Angeles region Jonathan Lange said that the deal was exemplary of the demand for quality space, especially among tech and entertainment companies.

Pre-pandemic, Santa Monica was among the most sought-after office submarkets in the Los Angeles area, and among the priciest in the nation. During the pandemic, however, office transaction volumes throughout Los Angeles fell to a 20-year low. A report from Savills showed only 10 million square feet of office leasing activity in Los Angeles last year, driving the vacancy rate to 22.5%, compared to 18% at the close of 2019. Office leasing transactions were down 44% compared to 2019, when office leasing totaled 18 million square feet in the market. In addition, the sublease supply increased 76% to 8 million square feet.

It wasn’t all bad news. Asking rents increased last year, up 6.7% year-over-year to $3.74 per square foot. New construction deliveries of high-quality office space were responsible for the increase in asking rents, but Savills expects rents to take a tumble this year as leasing activity continues to fall.

Overall, tech and entertainment companies, like Roku, have been the major drivers of leasing activity in the market, particularly among high-quality assets, like Colorado Center. The property is on 15 acres in the city’s media and entertainment district.