L.A. County Inks Deal for 207K SF of Long Beach Offices
Fifteen-year lease for space in Omninet Capital's building valued at $167M
In a 15-year deal valued at almost $167M, Los Angeles County has agreed to lease 207K SF of offices in Long Beach, one of the largest office leases of the year in the area.
The county’s Department of Social Services will be the tenant of offices at 1500 Hughes Way in Lincoln Village, in proximity where the 405 and 710 freeways meet.
Omninet Capital, based in Beverly Hills, acquired the 514K SF building in 2012 for $69M. According to a report in Commercial Observer, Omninet leased the offices for an estimated maximum first-year cost of more than $7.2M, with a one-time rent concession of $249K.
The building has been a magnet for government tenants, including the state’s Department of Industrial Relations and the Long Beach Housing Authority. The estimated lease cost of nearly $167M over 15 years includes tenant improvements.
Despite an uptick in leasing volume, the overall office vacancy rate in Greater Los Angeles ticked up to 21.3% in Q3 2023. Vacancy rose 50 bps quarter-over-quarter and 280 bps YOY, according to CBRE’s market report.
Greater Los Angeles posted negative net absorption for the fifth consecutive quarter in Q3 2023, with net absorption of minus 1.46M SF in the quarter, bringing the year-to-date total to minus 3.27M SF. The 1.4M SF of negative absorption in Q3 is the largest amount of negative net absorption the market has recorded in the last two years.
“This underscored the continued decrease in overall office demand as incumbent tenants downsized their office footprints and migrated to neighborhoods of Los Angeles that they perceived to provide a more advantageous commute, better amenities, and increased general safety for their employee base,” CBRE’s report said.
GLA experienced 3.4M SF of total leasing activity in the third quarter, with 1.9M SF of the total coming from new leasing activity.
“This 19% increase in new leasing activity quarter-over-quarter indicated a positive trajectory for tenant confidence in select areas of the market,” CBRE’s report said. “The average lease term for leases signed in the third quarter were 53 months.”
Many large lease deals were signed in West LA in the third quarter, which had the strongest quarter in terms of new leasing activity.
Clearlake Capital signed a 151K SF prelease at 1950 Avenue of the Stars and Penske Media Corporation took about 125K SF at the newly constructed LUMEN West LA project. AT&T signed a 49-month, 130K SF portion of a sublease at 2260 E Imperial Highway in El Segundo.