When Will Office Pop in DTLA?

The Los Angeles market overall posted a negative absorption in the fourth quarter of 2017, according to the office report from Newmark Knight Frank. West Los Angeles led absorption for the quarter, but Downtown still trailed behind in leasing activity. It is an interesting situation, because by all accounts, Downtown is on fire. It has strong fundamentals, development activity and multifamily and retail demand. Office, however, can’t seem to get going—even with Warner Music serving as a hopeful catalyst.

“What had traditionally been thought of as the Downtown office market, which is the high-rise office buildings, took a hit in a couple of different ways,” Steve Kolsky, EVP and managing director at Newmark Knight Frank, tells GlobeSt.com. “That is not the type of product that a lot of the tenants we have seen in Southern California are looking for. They don’t want to be in stoic high-rise buildings and taking multiple elevators to get to their floors. Even when you can make the space creative, which a lot of it has been converted into, it still isn’t a first choice. There is also a stigma to moving downtown People want to be in synergistic places with companies that they are doing good business with, and there isn’t a lot of that. ”

Still, Kolsky says that there is interest in the Downtown market, and it might be healthier that the absorption numbers show. Especially for renovated product. “Downtown is doing better than the numbers show,” adds Kolsky. “There is still a lot of residential that has come into Downtown Los Angeles, and that hasn’t been there before. That has fueled a lot more companies to look in the downtown area. The benefits of downtown are good public transit, housing and restaurants and nightlife. It is many of the same things that have triggered Hollywood. However, there isn’t the right product.”