Landlords make a play for rapidly expanding tech tenants

Los Angeles may not have the biggest collection of technology businesses in the country, but it does have some of the coolest ones and they are expanding quickly.

The region's deeply rooted entertainment industry is wielding new technology to create computer games, dramas for online video services such as Netflix Inc., wacky monologues for YouTube and amusing mobile phone applications people use to pass the time.

"We have the fun, sexy tech," said real estate broker Hayley Blockley, who helps negotiate leases with entertainment companies and other creative firms. "We make very little hardware compared to other markets."

L.A. County was the fifth-fastest-growing high-tech center the U.S. as measured by job growth from 2010 to 2012, brokerage CBRE group said.

But unlike in Silicon Valley and Seattle, where technology companies drive the office rental market, the tech industry is a comparatively small — but highly sought after — kind of tenant in the Los Angeles area.

Landlords love tech companies because they are expanding more than conventional corporations and they are flush enough to pay some of the highest rents in the region. Silicon Beach in Santa Monica and Venice commands prices that exceed monthly rents in the showy skyscrapers of downtown L.A.

Tech tenants represented about one-fourth of the 3.5 million square feet in Los Angeles County leases closed during the first six months of 2013, CBRE said. In August, comedy video website Funny or Die said it would rent more than 20,000 square feet in West Hollywood.

The bulk of Los Angeles office users are in financial services and insurance businesses, the brokerage said.

In Orange County, high-tech tenants are seeking nonconventional "creative" office space but have limited options because of short supply. The demand for such space has driven up office rental rates in Irvine, the Angel Stadium area of Anaheim and parts of south Orange County.

Across the country, firms involved in software development, mobile and social media technologies, and information and technology services are driving job creation, CBRE Group said.

These firms have added jobs five times faster than the national average, producing 366,000 new high-tech services jobs at a 17.4% growth rate, while total nonfarm jobs in the U.S. grew 3.4% from 2009 to mid-2013.

The high-tech services sector was responsible for 1 out of every 4 new office-using jobs, CBRE Group Inc. said, significantly affecting office occupancy and rental rates in many markets such as San Francisco's SOMA neighborhood south of Market Street, Redwood City and New York's Midtown South.

In addition to Silicon Beach, Los Angeles County has tech clusters in Playa Vista, El Segundo, Culver City and Hollywood. Rents are more expensive in some of those markets than others, but each has status in the tech world.

Real estate cachet counts in tech, certainly more so than it does in businesses in which competition for top employees is less intense.

"With a virtual 'war for talent' taking place every day, tech companies are going to great lengths to enhance the employee experience and attract, retain and nurture fresh talent," architecture firm Gensler said in a recent report on workplaces.

Tech firms are "very concerned" where their employees are located, analyst Colin Yasukochi of CBRE said. "They need to have an environment that fosters creativity and innovation, because innovation is key to the tech industry."

Some companies, including Microsoft Corp. and Google Inc., have manufactured creative campus environments out of whole cloth. Other tech firms choose locations with built-in appeal such as Santa Monica, where employees can surf before bicycling to work and choose from a wide array of bars and restaurants after hours.

As downtown Los Angeles' reputation as a 24-hour neighborhood grows, it stands to become another significant tech center in the region, real estate observers said.

Firms "looking for that urban aesthetic are coming downtown, trying to find diamonds in the rough," said broker Blockley of Jones Lang LaSalle's downtown Los Angeles office. So far, most have passed on the financial district where banks, law firms and other time-honored companies have reigned for generations.

That pattern stands to change because the financial district has the highest "walkability" score downtown, Blockley said, and the kind of tech firms thriving in Los Angeles are getting bigger much faster than most mature white-collar firms.

Companies that provide the social media we click to on our computers, create comedies we watch on tablets or make television commercials that catch our eyes while we ride the bus have room to grow as video display mechanisms grow more cheap and plentiful.

"Our appetite as users of content has not yet peaked," Blockley said. "And we'll continue to be exposed to that content on a 24-7 basis."

Twitter: @rogervincent

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World