CMCT Buys Echo Park Creative Office Building for $51M

Rolf K. McPherson building in the Echo Park neighborhood of Los Angeles has traded hands for $51 million between seller Foursquare Church and creative office developer CMCT. Located at 1910 W. Sunset Blvd., the property is an eight-story, 99,761-square-foot creative office space.

Originally built in 1965, the Rolf K. McPherson has been part of the Foursquare Church holdings since then. In addition to office space, the property has ground-floor banks and eateries. Foursquare Church plans to relocate its operations from the building. CMCT plans to execute a capital improvement plan to upgrade the building and cater to entertainment, media, and technology companies.

The Los Angeles office market was weakened by the pandemic, and has yet to enter a recovery. In May, Marcus & Millichap research anticipated that the Los Angeles office market was headed for a prolonged office recovery, forecasting that office vacancy would grow 160 basis points this year to 18.5%, and office rents would fall 1.4% to $37.50 per square foot.

By the end of the second quarter, it was clear that the market had challenges. According to research from Avison Young, the office vacancy in L.A. has increased to 17.8% as rents tumble and concessions rise. The metrics show that tenants are exiting office space—not moving to new locations. One area of improvement was the sublease market. At the start of the pandemic, some companies shed office space as a reflex, but many of those same industries performed well during the pandemic.

Some markets have fared better than others. The Downtown market has yet to find its footing after the pandemic. In the third quarter, the office vacancy rate climbed to 25%, up 300 basis points from the third quarter 2020, according to research from Cushman & Wakefield. As a result of remote work, 225,342 square feet of office space was vacated in the third quarter, a massive contributor to the increased vacancy rate. There was a paltry 163,924 square feet of leasing activity, but it did offset the move outs, resulting in negative 83,972 square feet of absorption. For the year, the market has negative 749,000 square feet of absorption. Despite the sluggish leasing activity, office rents increased to $45.96 per square foot.

Still many investors are executing value-add plans on office properties to cater to a new generation of office tenants. Lee Black and Veronica Black with KW Commercial represented both the buyer and seller in the transaction. It was CMCT’s first transaction with KW Commercial.