Jodi Summers = Office Real Estate

LOS ANGELES TO GET THE NEXT TALLEST BUILDING IN THE WEST

by Jodi Summers

It’s bigger in Los Angeles, thanks to the construction of the tallest office building west of Chicago. It was recently announced that the 73-story Wilshire Grand hotel and office building to be constructed in downtown Los Angeles. The $1-billion hotel and office skyscraper by developer Korean Airlines will live at Wilshire Boulevard and Figueroa Street. It will be a dramatic addition to the city skyline when it completed in 2017.

Designed by L.A.-based architect David Martin, a principal at AC Martin Partners, the 1,100-foot, glass-skin building will feature three floors of shops and restaurants at ground level, 400,000 square feet of office space, and a hotel with a “sky lobby” on the 70th floor. Guests will rise by high-speed elevators for check-in to one of the hotel’s 900 rooms. A restaurant will take over the 71st floor, and on the top floor, there will be an “infinity” pool and recreation area. The hotel brand has yet to be selected.

Martin designed the Figueroa-at-Wilshire high-rise across the street from the Wilshire Grand in 1990. The family firm was the primary architect of Los Angles City Hall in the 1920s.

The property is located just north of the STAPLES Center and The Ritz-Carlton Residences at L.A. LIVE, the luxury residential tower where residents enjoy access to the five-star lifestyle services of The Ritz-Carlton.

The 936-room Wilshire Grand, built in 1952, was originally known as Hotel Statler and later a Hilton. Before it closed at the end of 2011, the property was a mid-market hotel catering to conventioneers and tour groups from overseas.

Politically, the Wilshire Grand will be a symbol of South Korea’s growing status as a global economic powerhouse.

Korean Air is the flagship company for Hanjin Group, which has $20 billion in annual revenue from its interests in land, sea and air transportation as well as construction, heavy industry, finance and formation services.

“The new Wilshire Grand is an investment that makes sense and we are excited to continue our relationship with this great city,” Korean Air Chairman Y.H. Cho said in the L.A. Times.

The Wilshire Grand will slightly surpass in height the 72-story U.S. Bank Tower on Bunker Hill that has held the title of tallest west of Chicago since 1989.

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http://www.latimes.com/business/money/la-fi-mo-downtown-skyscraper-20130207,0,295662.story

http://images.catholic.org/ins_news/2013020048wgtower-p.jpg

http://cdn.designbuildsource.com.au/wp-content/uploads/2013/02/Wilshire-Grand-wide.jpg

http://www.socalofficerealestateblog.com/?p=2332

http://altwire.utne.com/zine/neuroscience_v1/previous-story/7034714562334c6271444150514f4e513557742f51513d3d

http://www.theagencyre.com/2013/02/west-coasts-tallest-building-to-be-built-in-downtown-l-a/

http://www.socalgreenrealestateblog.com/?p=75

SOCAL OFFICE REAL ESTATE SNAPSHOT ~ MAY 2013 ~ BROOKFIELD’S DOWNTOWN COUP

by Jodi Summers

The biggest news in L.A. office real estate is a changing of the guard. Brookfield Office Properties Inc., one of the biggest players in Manhattan real estate reached a deal valued at more than $2 billion, including debt, to become the largest office landlord in the Los Angeles downtown.

Brookfield and its partners agreed to pay $3.15 a share for MPG Office Trust Inc.’s (MPG) common stock, at a 21% premium, notes the Wall Street Journal. When the deal closes in 3Q, Brookfield will take control of four skyscrapers totaling five million square feet, including the Wells Fargo Tower and KPMG Tower, two of the five tallest buildings in Los Angeles. Taken with a purchase of preferred stock, the Brookfield-led group would pay more than $425 million in cash for the company, which has about $1.9 billion in debt.

Upon completion, Brookfield becomes the largest downtown office landlord, having 8.3 million square feet to rent in seven buildings.

The deal marks the end of an era for one of Los Angeles’ most celebrated office developers, MPG Office Trust. Founded by Robert F. Maguire in the 1960s, MPG was the best-known builder of top-flight office space in Southern California during the construction boom of the 1980s and 1990s.

Brookfield has eyed MPG for years. The deal “provides the opportunity to combine and operate a sizable portfolio of the highest quality assets in a major U.S. gateway city,” shares Friedrich.

To buy the four MPG towers, Brookfield created a fund with unnamed institutional partners to buy and reinvest in Brookfield’s Los Angeles assets. In all, the institutional partners have committed $600 million to the fund, which said it was putting in an additional $140 million for the deal.

While the Westside has been dubbed Silicon Beach because of the recent influx of technology and entertainment companies, the downtown towers have been dependent on financial firms, which are contracting. According to the L.A. Times, overall vacancy in the business district was 21% at the end of the first quarter, almost two percentage points higher than it was a year ago,

“We are being realistic about the downtown market,” he said. “It’s going to be a slow, steady improvement,” offers Brookfield CEO Dennis Friedrich.

With MPG’s departure, Brookfield will become the dominant operator of prime office space in the city’s financial core and play a major role in setting rents in downtown Los Angeles.

Brookfield owns $23 billion worth of office properties in some of the largest cities in the United States, as well as Australia, Canada and the United Kingdom.

We’re here to help you with your real estate needs. Please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – jodi@jodisummers.com or 310.392.1211, and let us move forward together.

**

http://www.latimes.com/business/money/la-fi-mo-mpg-to-sell-its-buildings-20130425,0,3897654.story?track=rss

http://www.latimes.com/business/money/la-fi-mo-brookfield-boss-20130426,0,2329482.story?track=rss

http://online.wsj.com/article/SB10001424127887323789704578444750509774718.html

http://www.socalofficerealestateblog.com/?p=2372

http://www.labormarketinfo.edd.ca.gov/

http://laedc.org/business-assistance/additional-resources/e-edge-newsletter/#1

http://assets.regus.com/images/2145/businesscentre/1_454x340.jpg

http://variantperceptions.files.wordpress.com/2010/03/untitled1.jpg

http://farm4.staticflickr.com/3096/2707736127_b72a645fa5.jpg

http://www.shelteringarms.org/calendar/images/BrookfieldOfficeProps.jpg

WINNERS SHARE THEIR VISION OF THE OFFICE BUILDING OF THE FUTURE

by Jodi Summers

NAIOP, the Commercial Real Estate Development Association, has chosen four companies as winners of its inaugural Office Building of the Future design competition….and one is a local hero.

The winners of this competition are:

Gensler, Los Angeles, Calif.

Hickok Cole Architects, Washington, D.C.

The Miller Hull Partnership, Seattle, Wash.

Pickard Chilton, New Haven, Conn.

The Office Building of the Future submissions detailed each firm’s vision and concept plan for utilization trends, sustainability and new building technologies. Each company submitted site plan views and perspective sketches that highlighted future building features, materials, technology and trends, and hard cost budget estimates.

The winners identified several common themes that will drive change in what is considered an “office” in 2020. The biggest change is from personal technology, employees more capable of completing service and information-based tasks wherever they choose. The advantage of the office of the future is that it will provide an array of flexible workspaces.

Gensler – Los Angeles’ own Gensler Architecture has the vision of a “hackable” building which they define as “an existing structure that has been updated beyond recognition and that incorporates a diverse mix of multiple uses within a building.” According to Gensler, “Hacking is a culture, not a technology. We believe it represents the most dynamic, pragmatic and sustainable vision for the future of office buildings and the future of work.”

Hickok Cole Architects – According to Hickok Cole Architects’ winning submission, “No one is tied to a desk and there are ample opportunities for diverse work environments, such as lounge work areas, communal tables, benching areas, hive configurations, individual work stations, and shared office amenities.”

The Miller Hull Partnership – The Miller Hull Partnership’s b(HIVE) concept represents “a building that becomes a part of an agile, adaptable business machine, somewhere between a hands-on community and the raw edge of technology.” Their vision includes 1) flexible, open space that is fast and inexpensive to build; 2) collaboration space that is carefully customized for tenants and easy to reconfigure; and 3) retail space on the ground floor with a diverse mix of uses.

Pickard Chilton – Pickard Chilton’s approach identifies three distinct principles. 1) Human qualities: A healthy workplace that is conducive to the productivity and well-being of employees, with qualities such as abundant natural light, access to fresh air, customizable work areas and greater collaboration spaces; 2) Business objectives: Innovative design and construction, efficient floor plates and multipurpose spaces support the owner’s business objectives; 3) Sustainability: The office building of the future incorporates an advanced system monitor to track, measure and display data about building performance to allow potential tenants to make informed decisions about their workplace and enable a high-performance building to stand out within a highly completive real estate market.

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http://www.naiop.org/en/About-NAIOP/News/NAIOP-News/2012/091812-NAIOP-Inaugural-Office-Building-of-the-Future-Design-Competition.aspx

http://ad009cdnb.archdaily.net/wp-content/uploads/2012/11/1353660790-genslers-hackable-buildings-2-537×358-528×352.jpg

http://www.socalofficerealestateblog.com/?p=2300

http://www.washingtonpost.com/business/capitalbusiness/reimagining-the-hoover-building-on-pennsylvania-ave/2012/10/26/d45141ca-1fac-11e2-9cd5-b55c38388962_gallery.html#photo=1

http://www.hickokcole.com/images/interiors_port/Accenture/accenture_2.jpg

http://www.hickokcole.com/images/arch_port/new/col_cntr4.jpg

http://www.paintsquare.com/blog/images/DDN-Jill-blog-Miller-Hull2-500.jpg

http://www.naiop.org/~/media/eLibrary/Development/1180peachtree_symphonytower.ashx

SOCAL OFFICE REAL ESTATE SNAPSHOT – FEBRUARY 2013 > LOOKS LIKE A DEAL, SMELLS LIKE A DEAL…

by Jodi Summers

Everyone is looking at real estate in the Los Angeles office market because it looks like a deal. Sales velocity for Los Angeles county office buildings accelerated 54% in the last year…and prices were still on the decline. The median sale price for office properties sold in 2012 was $184 per square foot, according to a recent Marcus and Millichap study. This is a drop of 9% year-over-year, and close to $100 per square foot lower than the market high.

Countywide, cap rates on occupied office building sales averaged in the high-6% range over the past year; with best-in-class properties trading closer to 5%. Stabilized office properties in outlying areas of the county changed hands in the 7% area.

Although investors are still prominent in the office real estate market, more owner users are getting back into the game. In 2012, county employers hired 52,000 workers – a 1.4% increase from 2011. As far as businesses using office space go, growth strength was in technology and legal.

Looking forward, this year, office-using employment is expected to expand 3% as 29,000 individuals are added to payrolls. Prognosticators predict that asking rents in Los Angeles County will rise 1.0% to $32.40 per square foot. Looking back, in 2012, the average asking rent for Class A space advanced 0.9% year-over-year to $37.43. Class B/C asking rents hiked 0.6% over the same time to $25.70 per square foot. In the previous year, Class A and Class B/C asking rents decreased 1.4 and 0.5%, respectively.

Class A office space in Los Angeles begins the year with a 14.3% vacancy rate. Vacancy for Class B/C office space is at 16%. In 2013, it’s believed that the 14.9% office vacancy rate we have seen for the past two years will shrink.

Developers, sniffing opportunity, completed construction projects totaling 116,000 square feet of space over the last four quarters, amounting to a 0.1% increase to stock…but that’s just the beginning…the planning pipeline has 6.7 million square of office space begging for construction, with a majority of new construction concentrated in the San Fernando Valley and Westside Cities submarkets.

In 2013, builders will complete 1.1 million square feet of office space, up from 309,000 square feet of space added last year, and surpassing the most recent five-year average completion rate of 820,000 square feet annually.

It looks like opportunity…it smells like opportunity…is it? Yes…positive momentum is finally returning to the Los Angeles office real estate market.

We’re here to help you with your commercial and investment property needs. Please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – jodi@jodisummers.com or 310.392.1211, and let us move forward together.

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http://www.marcusmillichap.com/research/reports/Office/LosAngeles_3Q12_LOR.pdf

http://www.socalofficerealestateblog.com/?p=2320

http://www.gallup.com/poll/159863/americans-tough-improving-job-market.aspx

http://www.cbpa.com

http://www.theatlanticcities.com/jobs-and-economy/2013/01/top-us-metros-year-end-2012-pay-increases/4343/

http://www.costar.com/News/Article/Do-a-Few-Good-Weeks-Portend-a-Good-Year-Ahead-/144948?ref=100&iid=319&cid=383F14EEE265B182474DA2442BACBBBF

http://topics.time.com/real-estate/articles/3/

http://www.oldtrailvillage.com/news/?tag=commercial-real-estate

THE SOCAL OFFICE REAL ESTATE SNAPSHOT ~ JANUARY 2013 ~ HAPPY? INDEED!

by Jodi Summers

2013 is indeed a happy new year for office real estate. Let us begin the drum roll of good news by letting you know that office vacancy rates are dropping…and that means higher cap rates and better sales prices are in the future. What’s more, the next wave of office architecture is up for your consideration.

Recent job creation increased absorption pushed down vacancy rates in the office, helped by the limited new supply of space. (Above and beyond the 400,000 sq.ft. of new office space Office in the newly opened Red Building @ Pacific Design Center.)

As our economy creeps back to life, 2012 saw U.S. office vacancies drop to their lowest level in almost three years. Major contributing factors are the demand from energy and technology companies combined with a dearth of construction.

The National Association of Realtors Commercial Real Estate Outlook Vacancy rates in the office sector are projected to fall from an estimated 16.7% in 4Q 2012 to 15.7% in the 4Q 2013. The markets with the lowest office vacancy rates presently (in the fourth quarter) are Washington, D.C., with a vacancy rate of 9.6%; New York City, at 10.1%.

The Los Angeles vacancy rate is estimated to be 12.5%.

Office rent is expected to increase 2.0% in 2012 and 2.5% in 2013. NAR believes the net absorption of office space in the U.S. totals 21.7 million square feet in 2012 and 49 million sq.ft. in 2013.

“What these findings suggest is that, in general, the industry is moving forward bit by bit. Nothing indicates a quick turnaround for commercial real estate, but it is improving,” observes Stephen Blank, the senior resident fellow for real estate finance at the Urban Land Institute. “Those who are patient and willing to rethink their expectations and adapt to market realities are the most likely to come out ahead next year. Investors must keep in mind recent progress made in the industry as they prepare for a slow but steady recovery. “

Given the lackluster yields of securities, Sandy Paul, national research director for Delta Associates contends that betters want a winning horse, and their stallion is commercial real estate. “Investors are looking to place capital in assets that are income-producing and have the benefit of tangible value,” Paul maintains. “Investors also may be concerned about potential volatility ahead, such as was seen during the October 2008 financial crisis and the August 2011 downgrading of US debt. Domestic commercial real estate benefits from its traditional status as a safe haven during periods of uncertainty.”

The Los Angeles office real estate recovery will advance in 2013, making modest gains in leasing, rents, and pricing.

In Los Angeles, according to Loopnet, lease rates for office properties close out the year at $22.12 per square foot…up 0.7% from 2012. (And up 0.7% from 2011, as well.) As a point of perspective, July 2008 was the last lease rate peak, with asking rents averaging $27.01 per square foot. The lowest asking lease rate in the past three years was $21.87 set in February 2012. We are currently 4.5% off the zenith.

Please consider….there is new wave in office real estate rolling in…major tenants like Yahoo, Google and Red Bull, among so many others…are willingly pay high rents in return for more efficient design layouts and lower operating costs in LEED-rated, green projects. The EZ lease off of the future features open floor plans characterized by a lack of individual offices with walls and doors. More on this in the next blog…

We’re here to help you with your commercial and investment property needs. Please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – jodi@jodisummers.com or 310.392.1211, and let us move forward together.

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http://www.bls.gov/news.release/pdf/empsit.pdf

http://laedc.org/business-assistance/additional-resources/e-edge-newsletter/#1

http://si.wsj.net/public/resources/images/P1-BH453B_Bette_G_20120807184508.jpg

http://www.globest.com/news/12_510/national/finance/Fiscal-Fears-Prove-CRE-Is-Safe-Haven-328359.html

http://www.uli.org/press-release/u-s-commercial-real-estate-recovery-to-advance-in-2013-with-nationwide-gains-in-leasing-rents-pricing-according-to-pwc-us-and-urban-land-institutes-emerging-trends-in-real-estate-forecast/

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http://www.globest.com/news/12_507/losangeles/office/Emerging-Office-Use-Trends-Raise-Issues-327993.html

OFFICE BUILDINGS ON THE WEST SIDE RULE

by Jodi Summers

Technology rules! Thanks to Google and other new technology companies, the Los Angeles West Side office real estate market is seeing seen the highest median sales prices in the country. Here are the latest West Side office market details courtesy of Marcus and Millichap’s 3Q 2012 Office Market Overview.

West Side Sales Trends

■ The median sales price of office buildings on the West Side of Los Angeles rose 11% over the year to $373 per square foot on average.

■ Congratulations! The West Side office real estate has charted the highest median price in the county, as well as the only year-over-year upturn in price.

■ The Los Angeles West Side is an attractive locale for risk adverse office investors. Sales velocity nearly doubled in the last 12 months.

■ Cap rates for deals traded over the last year average in the low-6% area for Class A office buildings, and the mid- to high-7% range for B/C assets.

■ West Side Office Sales Outlook: Owner users are willing to pay top dollar for West Side office buildings…but lower cap rates have limited the opportunities for investors.

West Side Lease Rates

■ The average lease rates for West Side office real estate rose 1.4% over the last year to $43.29 per square foot. In the same time frame a year ago. , Class A rents advanced

1.5% to $45.86 per square foot. Class B/C rents edged up 0.8% to $36.84 per square foot.

■ Managers calculated a 1.7% gain in effective rents to $36.28 per square foot in the past year.

■ Concessions have waned to 16.2% of asking lease rates.

■ West Side lessors are enjoying their fourth straight quarter of rent growth.

■ West Side Office Leasing Outlook: By the end of 2012 asking rents will rise 1.3% to $43.53 per square foot. Effective rents will increase 1.6% to average $36.56 per square foot.

West Side Construction and Vacancy

■ In the past year, 179,000 sq.ft. of new office space has been added to the West Side office market. Inventory expanded by 0.3%.

■ Approximately 990,000 sq.ft. of new space is planned for the West Side….though very few of these projects have inked in their starting dates. The largest new development on the docket is the Century City Center high rise, with 505,000 sq.ft. of office space.

■ Vacancy in the West Side office market was at 12.3% for the first ½ of 2012.

■ West Side Office Construction and Vacancy Outlook: Office inventory is about to take a big leap as the Red Pacific Design Center building becomes available, offering 400,000 sq.ft. of new office space. Another 88,000 sq.ft. of new office space will also become available.

■ Local vacancy rate will drop to 12%.

We’re here to help you with your property needs. Please contact Jodi Summers and the SoCal Investment Real Estate Group @ Sotheby’s International Realty – jodi@jodisummers.com or 310.392.1211, and let us move forward together.

https://www.marcusmillichap.com/research/reports/Office/LosAngeles_3Q12_LOR.pdf

http://www.socalofficerealestateblog.com/?p=2267

http://www.calmis.ca.gov/file/lfmonth/la$pds.pdf

http://www.reisreports.com/blog/2012/05/los-angeles-office-properties-waiting-on-jobs/

http://www.socalgreenrealestateblog.com/wp-content/uploads/2011/09/Google-Venice-under-construction.jpg