Los Angeles Office Deal Volume Highest in the Country

Worthe Real Estate completed the Second Century Project for Warner Bros., in Burbank. Rendering by Sora, courtesy of Gehry Partners

As we enter the last quarter of the year, Los Angeles’ office construction pipeline is still on a downward trajectory—in line with national trends. Despite a slowdown in new development, office investment in the metro picked up since the first quarter, Los Angeles leading the nation in terms of sales, according to recent CommercialEdge data.

As of October, the City of Angels had nearly 2.2 million square feet of office space under construction across 23 properties, representing 1.1 percent of the existing inventory—below the national average of 1.7 percent. The metro’s relative to total stock under-construction pipeline outpaced that of Washington, D.C. (1.0 percent) and Chicago (0.5 percent). Across other gateway markets, Boston led the ranking with 5.3 percent, followed by Miami (4.6 percent), San Francisco (4.1 percent) and Manhattan (1.7 percent).

Deliveries and construction starts

In terms of office space under construction, Los Angeles’ pipeline outperformed that of Chicago (1.4 million square feet), but was lower than in Miami (2.8 million), Washington, D.C. (4.0 million), Manhattan (5.0 million square feet), San Francisco (6.0 million) and Boston (13.7 million).

In the years’ first 10 months, some 1.6 million square feet across 13 properties came online, representing 0.5 percent of stock. One of the largest deliveries was the 800,000-square-foot, two-building Second Century Project, completed in May. Worthe Real Estate Group and Stockbridge Real Estate Fund developed it as Warner Bros.’ new headquarters, in Burbank, Calif.

Year-to-date through October, developers commenced construction on eight properties totaling 1.8 million square feet. A significant office project that broke ground in August is the 730,000-square-foot Century City Center. JMB Realty’s plans call for a 37-story Class A building, scheduled for delivery in early 2026. Creative Artists Agency will anchor the property, occupying 400,000 square feet, while Clearlake Capital preleased 151,104 square feet in July.

Los Angeles: Leading the nation for office sales

Year-to-date through October, 7.5 million square feet of office space changed hands in Los Angeles, for a total of $1.86 billion. The California metro had the largest transaction volume in the nation. So far, a total of 368,417 square feet changed hands for $49.9 million during the fourth quarter of the year. Compared to other gateway markets, the metro’s transaction volume surpassed Manhattan ($1.71 billion), Boston ($1.48 billion), Washington, D.C. ($1.42 billion) and Miami ($944 million).

The $104 million sale of Union Bank Plaza in March remained the largest transaction. Image courtesy of KBS

The largest office deal since the start of the year remains Waterbridge Capital’s $104 million acquisition of Union Bank Plaza, a Class A office building in downtown Los Angeles. The 675,945-square-foot high-rise was the last asset remaining in KBS Real Estate Investment Trust II’s portfolio.

Another notable transaction was JP Morgan Asset Management’s $98.5 million acquisition of Pen Factory – West Building, a 132,200-square-foot low-rise in the metro’s Santa Monica submarket. Clarion Partners sold the property in August.

In March, Pendulum Property Partners paid $93.8 million for Mix at Harman Campus, a 160,366-square-foot Class A building in Northridge, Calif. The low-rise office asset was sold by DRA Advisors.

Office assets in Los Angeles changed hands at an average of $282.0 per square foot year-to-date through October. Prices in the metro were higher than the national average of $192.3, but lower than San Francisco’s $340.6 per square foot and Boston’s $312.6 per square foot. Among other gateway markets, Los Angeles outperformed Washington, D.C. ($215.5 per square foot) and Chicago ($107.3 per square foot).

Notable office leases in Los Angeles

In August, Verve Talent & Literary Agency signed a 53,000-square-foot lease at Lincoln Property Co.’s BA/SE, a creative office campus in the metro’s Hollywood submarket, with the tenant relocating its global headquarters. The deal marks one of the biggest office commitments in Los Angeles this year.

DivcoWest inked a 21,377-square-foot leasing agreement with Syracuse University at a nine-story, Class A office building in North Hollywood, Calif.

The Gas Co. Tower. Image courtesy of CommercialEdge

In April, Colliers became the exclusive leasing agent in charge of Gas Co. Tower in downtown Los Angeles. A court-appointed receiver of Trident Pacific Real Estate Group retained the brokerage company after the owner, Brookfield Properties, defaulted on a $465 million loan package associated with the property.

At the beginning of the fourth quarter, Los Angeles had some 4.6 million square feet of shared space, more than in Washington, D.C. (3.3 million square feet), Chicago (3.2 million square feet), Boston (2.9 million), San Francisco (2.1 million square feet) and Miami (1.6 million). Across gateway metros, only Manhattan had more coworking space, at 9.7 million square feet.

Los Angeles also had one of the largest shares of coworking space as percentage of total leasable office space, reaching 2.2 percent in October—surpassing Chicago (2.0 percent), Boston (1.8 percent), Washington, D.C. (1.6 percent) and the national average of 1.7 percent.

Year-to-date through October, flex office provider Cubework had the largest footprint in the metro, its locations totaling 1,630,562 square feet. The company was followed by WeWork, with 962,832 square feet, while Spaces was third, with 594,193 square feet.