While the office market across the greater Los Angeles region may still be trying to find its footing in 2021, there are signs of improvement thanks to a good number of transactions that are now beginning to shape the market. In a sign of continued interest in office assets across the region, Prospect Ridge, a real estate investment firm with offices in New York, San Francisco and Brentwood, Tenn., spent $106,660,000, or around $456 per square foot, to acquire the Burbank Empire Center assets located at 2350 and 2400 Empire Avenue. The seller, according to public records, is UBS Realty Investors, and the sale closed at the end of July 2021.
The two buildings total just around 234,000 square feet, with the property located at 2400 Empire Avenue coming in around 135,000 square feet, and the building at 2350 Empire Avenue around 99,000 square feet. Both buildings were developed in 2002 and feature floors around 32,000, according to the property’s pages on Loopnet.
UBS Realty has been the owner of the assets since August of 2015, when the international investor paid $80,350,000 for the pair of buildings.
Since the onset of the pandemic, sublease office space has been one of the most prominent aspects of the office leasing market. According to a recent, 3rd Quarter of 2021 market research report by brokerage firm Newmark, sublet activity began to trend down at the start of the second half of this year, accounting for 4.3 percent of inventory, or roughly 9.1 million square feet. This compares to 4.4 percent from the quarter before.
Vacancy did reach a new high, adding over 2.1 million square feet in the greater Los Angeles market, and it hit 19.2 percent in the third quarter of 2021. 1.6 million of that figure was from ground-up construction and newly renovated space that was delivered during the quarter. 43 percent of that number was pre-leased, however, and that will result in a decrease in vacancy once tenants occupy the space.
The report noted that West Los Angeles has been leading the recovery of the market so far, primarily because it sits at the intersection of media and technology firms, which have been active during the last 20 months. This gives other pockets, like Burbank, an opportunity to keep strengthening over the near to mid-term.
In two other notable transactions, San Francisco-based DivcoWest spend $92 million, or $512 per square foot, to acquire a 180,000 square foot property located at 5250 Lankershim Blvd. in the East Valley submarket. Hyundai Motor of America also purchased a creative office asset in El Segundo located at 2221 Park Place for $70 million, or around $758 per square foot.
While a good number of tenants continue to delay long-term real estate decisions, those in the tech and media space are continuing to be active, according to Newmark. The return-to-work policies will likely change with vaccination mandates for those who enact them, but employees also have a lot of leverage in today’s market, states Newmark, which will drive companies to adopt more flexible work and telework models.