My website: www.sandralew.com
The very hot silicon beach housing market has resulted from growing high tech firms in the area. Wow! Did you know that 86 percent of the nearly 700 tech firms in LA are located in Silicon Beach according to CBRE? No wonder there has been such a demand in housing. People want quality of life and desire to live close to where they work. Great jobs, coastal breezes, upscale shopping, hip restaurants, gyms, and proximity to the beach lifestyle make here worth every penny.
I've personally experienced so many multiple offers for my buyers. It's the lifestyle and potential upside with more dense conservative ratio of employees to work space that drives greater housing needs as well. Housing supply has not kept up with demand thus driving up prices and rents.
Silicon Beach keeps on scaling upward and outward
Rents soar in hot hoods, but expansion could prove to be a market equalizer
September 22, 2016 10:30AM
From the L.A. print issue: In
less than a decade, Silicon Beach has grown from a Silicon Valley
outpost in Santa Monica to encompass a stretch of coastline as far south
as Playa Vista and as far east as Culver City. Market pros are now
closely watching whether the high-tech enclave will continue marching
south to El Segundo, eating up real estate along the way.
Fully 86 percent of the nearly 700 tech
firms in Los Angeles are located in Silicon Beach, according to CBRE.
The roster includes such boldfaced names as Facebook, Google, Hulu and
Snapchat, as well as high-tech incubators and startups — such as
DogVacay and Scopely — which haven’t (yet) achieved household-name
status.
But experts say this isn’t a replay of
the dot-com bubble in the late 1990s, when startups rushed to get big in
order to score an initial public offering while the market was red hot.
These days, brokers say, young tech companies aren’t land-banking
office space, as they did back then.
“You don’t see 50 employees taking 20,000
square feet,” said Jaclyn Ward, an associate at JLL’s Los Angeles
office. “They’re being pretty conservative.”
This tendency, in turn, has kept the
sublease market fairly tight and given landlords pricing power in the
core market in Santa Monica. Sublease space is more plentiful on the
periphery, in Playa Vista.
“The challenge in Silicon Beach is a
pretty continual lack of space that pushes rental rates up,” said George
Pino, the co-founder and CEO of Commercial Brokers International.
However, he added, the continued expansion of Silicon Beach into new
neighborhoods could become an equalizing force on market prices.
Here’s a look at some of the biggest deals and most notable tenants in the area’s key beachheads.
Santa Monica
In downtown Santa Monica, where tech
firms vie fiercely for prime locations, vacancy rates hover in the
single digits and asking rents have soared to $7 or $8 a square foot per
month, up from an average of $4.61 just a few years ago, according to
data from JLL. But in outlying areas, some big-name companies have
pulled up stakes. Both Yahoo and The Honest Company have decamped for
Playa Vista, leaving tens of thousands of square feet in their wake.
In the second quarter of 2016, Santa
Monica overall had a 17 percent office vacancy rate and average asking
rents of $5.40 a square foot, according to JLL. Ward said the “massive
exodus” for Playa Vista in 2015 and early 2016 led to the higher vacancy
rates, although some of that space has already been absorbed.
In early 2016, Oracle inked a deal to
expand from 80,000 square feet to approximately 130,000 square feet in
The Water Garden, located at 1620 26th Street. The building is currently
being renovated to include collaborative work space in its lobby and an
outdoor seating area with a fire pit, said Michael Nieman, an attorney
in private practice who is also a commercial real estate broker at CBRE,
and who represents the building.
In June, AwesomenessTV, a teen-targeted
video-streaming company majority owned by DreamWorks Animation, closed
on a 90,000-square-foot lease for its headquarters at Pen Factory, a
Clarion Partners property at 2701 Olympic Boulevard.
Venice
Venice Beach has some of the highest
asking rents in Silicon Beach, with prime space renting for upward of $8
a square foot. Google is a large tenant, with a 100,000-square-foot
campus environment in three buildings, including the historic Binoculars
Building designed by Frank Gehry. In front of the building is a giant
binocular-shaped sculpture by Claes Oldenburg and Coosje van Bruggen.
Snapchat is another key tech player in
the area. In 2015, the company doubled the size of its Venice Beach
lease at the intersection of Venice and Abbot Kinney boulevards to
40,000 square feet. In 2016, it leased 80,000 square feet in city-owned
structures at the Santa Monica Airport, including two buildings and
eight hangars. Snapchat has agreed to make $1.4 million in improvements
to the buildings for a rent credit of five months.
“Snapchat is always a hot topic,” Ward
said. Founded in a beachfront bungalow on Ocean Front Walk in Venice
Beach in 2011, the company later moved into roomier quarters at 63
Market Street, also in Venice Beach. It continued to expand by inking
more leases around Venice Boulevard.
Playa Vista
Playa Vista certainly isn’t playing Kmart
to Santa Monica’s Target, but many market pros do see it as a veritable
bargain. With average asking rents below $5 a square foot and a wealth
of new creative space, Playa Vista — just minutes south of Santa Monica —
has attracted new and established tech companies alike. At least 80
percent of Playa Vista’s commercial space is occupied by technology,
entertainment and media companies, including many industry heavyweights,
such as Facebook, Microsoft, YouTube, IMAX and Sony Playstation.
The Silicon Beach stronghold has even
been immortalized on TV. Scenes for ABC’s “Revenge” were filmed at the
Water’s Edge office complex, located at 5510 Lincoln Boulevard, which
includes a reflection pool and recreation areas. Electronic Arts leases
nearly 150,000 square feet in two buildings, and sublets space for
filming at Water’s Edge.
In 2014, Google spent $120 million to buy
12 acres next to Howard Hughes’ famed “Spruce Goose” airplane hangar,
which is zoned for nearly 900,000 square feet of commercial space. Then,
in 2016, the company acquired a long-term lease for the hangar as well.
YouTube, a Google subsidiary, has
occupied space next door since 2012, when it became one of the first
tenants in the newly opened Hercules office campus, which also occupies
land formerly owned by the Hughes Aircraft Company. Dubbed “YouTube
Space LA,” it’s a spot where YouTube video creators — either employees
or people from outside the company — can collaborate.
In April 2016, Facebook scooped up a
long-term lease to a three-story, 55,000-square-foot building being
developed by Vantage Property at the east end of the Playa Jefferson
office campus. The project is slated for completion in late 2017, and
Facebook will occupy 35,000 square feet of the building, said Jonathan
Larsen, a principal and managing director of Avison Young in Los
Angeles.
In the summer of 2016, Yahoo was also preparing to move
from space it has long occupied in Santa Monica, into a
130,000-square-foot space in the new
Collective campus on Playa Vista’s West Bluff Creek Drive.
Collective campus on Playa Vista’s West Bluff Creek Drive.
The Honest Company, an organic
personal-care products retailer founded by actress Jessica Alba, moved
its headquarters here in 2016, taking an 83,000-square-foot spread
across the top three floors of the i|o building, which is located at
12130 Millennium Drive. The fast-growing startup had revenue growth of
more than $150 million in 2014 — the most recent year for which the
private company has released data.
Culver City and El Segundo
Unlike other areas in Silicon Beach,
Culver City’s asking rents are holding the line. The average rate for
Class A office space remained flat, at $3.33 a square foot, during the
first half of 2016. This makes rents here substantially lower than in
other areas of Silicon Beach, where year-over-year increases of 50 to 75
percent are not uncommon.
Culver City has around 800,000 square
feet of vacant office space, according to JLL. But brokers say that
soaring prices in popular coastal neighborhoods such as Venice Beach
have spurred bargain hunting here that might absorb some of the
inventory.
WeWork, which operates co-working office
space in markets from Los Angeles to New York, signed a long-term lease
for 75,400 square feet at 5782 Jefferson Boulevard in Culver City in
April 2016. The company plans to move in by late 2016, despite slashing
its profit forecast by nearly 80 percent in July.
Farther to the south, El Segundo is being
eyed as the next expansion area for Silicon Beach. The neighborhood
already has multi-family buildings and office space, albeit much of it
is in need of renovation.
“In Silicon Beach, some companies start
with one person and some start with five, but they exponentially grow
and add space,” Larsen said. “The next Honest Company is out there,
growing, below the radar.”
Source: http://therealdeal.com/la/2016/09/22/silicon-beach-keeps-on-scaling-upward-and-outward/
