Office Glut Gives Tenants Clout

The greatest supply ever of new office space is now coming into the greater Los Angeles market.

More than 21 million square feet of leasable space is completed or under construction. A year ago, the figure was 18.6-million square feet.

In this rising supply of space, there is a tenants’ market and the use of “creative” real estate leasing transactions.

Such abundance of commercial space, particularly in downtown, Westwood/West Los Angeles and the Los Angeles International Airport areas, signals bargaining opportunities for tenants who want to make a move into those sections of the city, says Howard Sadowsky, senior vice president here for Julien J. Studley Inc., national realty specialists and consultants in commercial brokerage.

“The developers of the new buildings are all trying to find their niche in the marketplace,” he said. “The builders who are most creative and sensitive to the needs of tenants will do well in 1985. While most, if not all owners, are offering some kind of concession package, the developer who goes beyond the norm and becomes more creative in the total packaging and marketing of the building will succeed in leasing his project.

“In order to entice tenants to their respective buildings, developers will be offering up to a year’s free rent, dollars toward above-standard improvements, a cap on the increase to parking and so forth but these inducements don’t seem to be enough.”

“We find a number of developers taking the next step, or more importantly, a different direction. They are trying to entice with design. If you look around the city, most of the new buildings are of an odd and unusual shape. The rectangle building is out; five-sided, rounded corners or triangle buildings are popping up all over.

“Some developers are putting greater quality into the construction and improvement of the building. No longer is the simple glass structure acceptable. O’Melveny & Myers’ new building downtown leased up its space by using high-quality materials, thus creating a high-profile image. Tenants are demanding better-built buildings and are willing to pay for them.

“No longer is the simple brochure the standard marketing tool. In fact, a 10-minute voice-over slide show is becoming an additional ingredient to help sell a new major building.”

Sadowsky noted that during 1984 about 8,870,192 square feet of office space was leased in all buildings throughout the Los Angeles area. The city has averaged 8,500,000 square feet leased for the last five years, indicating that office space demand has been very consistent.

He said the supply in downtown Los Angeles is now approaching 8.31 million square feet, with 5.4 million square feet available immediately.

Westwood/West Los Angeles will have a total of 4,309,680 square feet, with 3.4 million being offered now. The airport area has 3 million square feet available with another 417,900 square feet under construction.

And that is why such oversupplies will translate “into sensational deals for tenants,” he predicted.

The concept of equity positions by tenants in office structures has been a demand factor for some time but plans vary depending on needs and the firms involved.

For instance, Westside Towers at 11835-11845 Olympic Blvd. is offering equity to any tenant leasing office space there. There is no additional charge for the equity and the liability of the tenant is limited. At International Towers, at 9th and Figueroa streets, cash is not required in taking equity positions.

Another comparatively new ingredient in the creative leasing field, the Studley executive said, is the “intelligent building”--employing the newest techniques to save energy and reduce costs.

Such “smart” structures also have the built-in sophistication of communication systems, available to the tenant from the building’s owner. Included would be all the facilities, equipment and services needed to deal with the world of computerization.

Michael Geller, assistant vice president, adds:

“These technologies have brought together many services in efficient and cost-effective ways. Furthermore, everyone wants to be part of the computer age.”

All of which means that developers and owners, in this very competitive arena, must create attractive packages to provide the best amenities as tenant-lures, Sadowsky said.

Looking at the leasing activity of 1984, he said the local market recorded 8.9 million square feet of space leased, down 6% from 1983’s 9.4 million square feet.

Three sectors reached or topped the 1-million-square-foot mark, downtown Los Angeles, with 1.8 million, Westwood/West Los Angeles with 1.1 and Century City with 1 million.

Area-wide, the average rental asking price was $2.11 per square foot per month, fully serviced. There was a 4% increase over 1983 costs, with space in new structures averaging $2.23 per square foot per month and $1.85 in old buildings; respective 1983 figures were $2.16 and $1.77, fully serviced.

Los Angeles ranked fourth nationally in total office leasing of old and new space. New York City was first with 35,004,093 square feet (27,326,082 in Manhattan); Washington, D. C. was second with 14,298,939, and Houston, 12,471,920, was third. Chicago with 6,867,146 and Boston with 2,249,722 followed Los Angeles.

The November/December issue of the Studley Report and Spacedata/Los Angeles bimonthly are computerized records of all Los Angeles office space in existing buildings and projects under construction.

Following is a list of new office buildings with 45,000 square feet or more of available space for lease, either recently completed, under construction or about to be started:

DOWNTOWN Floors Total Area Crocker Center Phase I 55 1,080,000 Crocker Center Phase II 54 1,042,000 444 So. Flower St. 48 890,000 800 So. Figueroa St. 12 122,000 400 So. Hope St. 26 665,000 800 So. Hope St. 8 250,000 Beaudry Center 27 698,000 Grand Financial 22 435,000 California Plaza Phase I 42 960,000 Citicorp Plaza Phase I 41 895,000 Figueroa Plaza I 16 303,000 International Tower 22 342,000 Wilshire-Bixel 16 278,000 Wilshire Financial 36 350,000 Total 8,310,000

MID-WILSHIRE & HOLLYWOOD Floors Total Area 145 S. Fairfax Ave. 5 57,254 3699 Wilshire Blvd. 12 300,000 4751 Wilshire Blvd. 3 96,000 4221 Wilshire Blvd. 4 140,000 6100 Wilshire Blvd. 15 203,000 6500 Wilshire Blvd. 22 436,000 8981 Sunset Blvd. 5 37,000 Total 1,269,254

BEVERLY HILLS & CENTURY CITY Floors Total Area 1640 Century Park East 16 300,000 1875 Century Park East 23 411,000 1925 Century Park East 23 411,000 50 No. La Cienega Ave 3 68,000 120 So. Spaulding Drive 4 60,000 8501 Wilshire Blvd. 3 81,500 200/274 No. Robertson Blvd. 6 100,000 9340 Santa Monica Blvd. 4 182,600 640 San Vicente Blvd. 6 72,600 Wilshire/Rodeo South 3 79,200 Total 1,765,000

WESTWOOD & WEST LOS ANGELES Floors Total Area 1999 Bundy Drive 3 171,633 11500 Olympic Blvd. 6 232,730 10474 Santa Monica Blvd. 3 52,740 3415 Sepulveda Center 12 166,175 World Savings, 11601 Wilshire Bl. 25 465,000 10780 Santa Monica Blvd. 4 90,000 Santa Monica Comstock 4 95,200 10351 Santa Monica Blvd. Westwood Gateway 22 303,600 11111 Santa Monica Blvd. Wilshire, Bundy 14 284,000 Olympic Centre, 11150 Olympic Blvd. 11* 149,000 11175 Santa Monica 3 57,500 11999 San Vicente Blvd. 3 55,600 1950 Sawtelle Blvd. 3 102,000 Westwood Atrium 3 104,000 Westside Towers 12 242,700 11835 W. Olympic Blvd. Westside Towers 12 155,700 11845 W. Olympic Blvd. Wilshire Brentwood Plaza 15 239,500 12100 Wilshire Blvd. 18 347,000 Gateway Los Angeles 13 150,000 12500 Wilshire Blvd. Filmcorp Center 8 306,000 10000 Washington Blvd. One Westwood, 10990 Wilshire Bl. 17 197,600 Wilshire-Granville 23 342,000 Total 4,309,680

*Five floors are parking levels

SANTA MONICA Floors Total Area 881 Alma Real 3 88,000 520 Broadway 6 97,000 Colorado Place, Building B 3 90,000 429 Santa Monica Blvd. 7 78,600 Wilshire/Harvard 6 56,400 2600 Colorado Blvd. 5 315,000 Total 725,000

FOX HILLS & AIRPORT Floors Total Area Kilroy Airport Center Tower V 12 291,000 9800 La Cienega Ave. 14 338,000 5200 W. Century Blvd. 10 314,000 5777 W. Century Blvd. 16 520,000 5933 W. Century Blvd. 12 192,700 Western Federal Building 3 118,000 100 Corporate Point 3 106,000 200 Corporate Point 3 100,000 300 Corporate Point 3 100,000 222 Sepulveda Blvd. 24 534,300 12552 City National Bank Building 3 84,000 4533 Glencoe Ave. 2 72,000 4551 Glencoe Ave. 2 72,000 Park View Plaza North 6 150,000 1235 Rosecrans Ave. Park View South 6 150,000 1235 Rosecrans Ave. 101 Sepulveda Blvd. 3 200,000 Rosecrans/Aviation 3 75,000 Total 3,417,900

WEST SAN FERNANDO VALLEY Floors Total Area 18425 Burbank Blvd. 6 95,000 21600 Oxnard St. 20 350,000 21515 Vanowen St. 2 52,500 20561 Ventura Blvd. 3 80,000 Warner Center Business Park II 3 345,000 Informatics Building 3 84,000 21800 Oxnard St. 12 206,000 20750 Ventura Blvd. 4 150,000 Total 1,362,500

EAST SAN FERNANDO VALLEY, BURBANK & GLENDALE Floors Total Area AIC Plaza, 13245 Riverside Drive 6 75,000 American Savings Plaza 21 373,600 15260 Ventura Blvd. Galleria Tower, 100 Broadway 12 147,000 Getty Plaza 36 750,000 10 Universal City Plaza 4640 Lankershim Blvd. 6 68,700 330 No. Brand Ave. 12 316,000 330 No. Glenoaks Blvd. 10 171,000 Sherman Oaks Professional Plaza 6 80,000 Sherman Oaks Tower 15 265,000 15303 Ventura Blvd. Sherman Plaza, 15350 Sherman Way 3 119,000 16030 Ventura Blvd. 6 155,000 4130 Cahuenga Blvd. 4 77,000 Central Park, 3500 N. Olive Ave 14 251,000 3800 Alameda Ave. 21 404,000 425 Colorado 7 118,600 Encino Terrace Center 6 385,000 Noble Professional Center 4 51,000 16801 Ventura Blvd. 6 170,000 First Financial Plaza 6 210,000 101 South 1st St. 4 62,000 Total 4,322,500