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8/17/16
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Demand from current occupants, technology, creative and co-working tenants could result in as much as 44 msf of demand for creative office space in the Greater Los Angeles region in the next few years, according to the latest research by CBRE Group Inc.
Growth in start-ups over the next five years alone could total 4.8 msf in creative space needs, according to the report. The L.A. area is home to about 1,900 new start-ups, with a particular heavy focus on media, entertainment and software. These new ventures commanded 48 percent of the $7.6 bil in funding since mid-2013 in Los Angeles and Orange County.
“If you look at the amount of start-ups in this region, you realize the current and future demand potential for creative office space,” said Petra Durnin, head of research and analysis for Southern California. “While the start-up scene is much bigger in the Bay Area, Los Angeles was in fourth place last year in the number of rounds of money raised for new ventures.”
Space requirements by co-working companies is also soaring as the need for temporary shared office space is expanding from mainly smaller entrepreneurial ventures to well-established firms with main offices in other cities or states that aren’t ready to commit to a multi-year office lease yet.
“In the next five years, creative space will be synonymous with office space,” said Durnin, who added that approximately 30 msf of office leases will expire in the next five years. “As old leases end, virtually all tenants, whether we’re talking tech company or accounting firm, will update to some form of creative space.”
Leasing activity of creative office space in 2015 climbed 91 percent to a record, and asking rents have increased 33 percent since the second quarter of 2013 in response to all this demand. This has propelled developers to build new, adding about 2.3 msf of creative space in the area while at least 27 existing buildings in the Los Angeles area have been converted into creative space, including downtown’s Ford Motor Factory, Glendale’s Masonic Temple – now home to CBRE’s LA North offices – and Broadway Trade Center.
“Los Angeles has a unique combination of historic office buildings and industrial product,” said CBRE Senior Vice President John Zanetos. “These are one-of-a-kind buildings with exposed brick and wood-beamed ceilings left over from a once-robust manufacturing economy that are no longer useful in the way they were originally intended. These revamps make them relevant again and offer tenants a unique branding opportunity and exciting space to work out of.”
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