The task of finding office space for your startup may seem daunting, and one you're tempted to ignore until the last feasible moment (except for the fact that that's the worst possible thing you can do). Deciding where to begin is a job in itself: Where...
Office Developers Hold Off on Speculative Construction for Now
Though demand for office space continues to improve, industry experts say it’s still too early to expect a surge in speculative construction in the sector. Office developers are watching constructions costs rise and sensing some lingering caution from corporate executive teams,...
Neighborhood Spotlight: Creatives, walk this way to trendy, midcentury-modern Silver Lake
One of L.A.'s older streetcar suburbs, Silver Lake first developed as Ivanhoe, a transit-oriented stretch of homes and shops clustered on either side of Sunset Boulevard that was a short Pacific Electric Red Car ride from downtown. That was in the early...
DTLA — People who live and work in Downtown Los Angeles have long asked for a change at Pershing Square, which was originally a park filled with greenery, but for several decades has been better described as a parking garage with...
Calabasas’ fast-growing commercial real estate brokerage business Marcus & Millichap Inc. ended its first quarter with a double-digit jump in profit and a new chief executive. Net income rose 8 percent to $14.8 million (38 cents a share), compared to $13.7 million...
A 24,000 square-foot-medical and office park in Palmdale has been sold for nearly $5 million, according to commercial brokerage firm Lee & Associates – LA North/Ventura Inc. in Sherman Oaks. L.A.-based private investment group Valerio Court bought the Challenger Business Park at...
Body Reform Physical Therapies, Inc. renews at 9665 Wilshire Blvd. in Beverly Hills. Deal represented by Mark Robinson & Kai Kolodziejski of Cushman & Wakefield.
BLOG & ONLINE NEWS
Morrison Appointed to President of CBRE Global Investors' US Managed Accounts Group
CBRE Global Investors has named Dave Morrison as president of its U.S. Managed Accounts Group, the firm's $9.8 billion investment management services platform that caters to its largest investor clients through tailored separate accounts and open-end fund vehicles. Morrison joined CBRE Global...
When we think about the evolution of office spaces, our minds often go to recent innovations: shared workspaces, open floor plans and increased worker mobility. But meeting rooms, too, have kept up with the pace of change. More than just a space...
South Bay Retail Center Refinanced with $17 Mil Loan
Hawthorne Xchange, a 63.8k sf, neighborhood shopping center in Hawthorne, has been refinanced with a new $16.9 mil, 10-year loan. The borrower, a local investor operating as Howard Building LLC, manages a portfolio of approximately 300k sf of commercial and retail...
5 Simple Rules to Follow When Looking for Office Space
The task of finding office space for your startup may seem daunting, and one you're tempted to ignore until the last feasible moment (except for the fact that that's the worst possible thing you can do).
Deciding where to begin is a job in itself: Where do you start looking? What's a fair price for the neighborhood you want? Should you be calling the numbers on those buildings signs advertising commerical space to rent?
The list of considerations could stretch on and on -- but doesn't have to. If you're starting from square one, these five simple rules will clarify the commercial leasing process and, ultimately, guide you to a smarter decision for your startup.
1. Calculate how much space you need.
The question of "how much space do I need" has an objective answer. After all, you wouldn't want to pay for space you don't actually need or agree to space that you'll outgrow long before the lease term is up.
Your future office is priced by the square foot, so you need two pieces of information to work on the equation: How many employees do you have? And, how much space does each employee need? Hopefully, you know the answer to the first question and can find some helpful industry standards to answer the second one.
An average office dedicates 125 square feet per person. If that sounds like a lot, it's not. It's average (though if you need to be more economical with space, you can certainly downsize to 100 square feet).
At this juncture, you face a few decisions that will affect not only how you allocate office space but how you define your company's culture. Do you allocate the same amount of space to each employee, or do some need/deserve more space than others? That's a philosophical question as much as a logistical one. Do the senior members of your team really need private offices? Naturally, that will affect the calculation.
Furthermore, your future office needs to house future employees. With most commercial spaces running on multi-year leases, you may not be able to forecast headcount precisely; and that's okay. But, as a general rule, you should accommodate future employees with something in the vicinity of 10 percent to 20 percent more space than the current workforce needs.
No need to work out these figures in your head, though. There are basic tools like space calculators that can help.
2. Start looking for that office space early.
At minimum, six months before your current lease's expiration or your anticipated move date is the time to start the process of finding a new space. If you're not operating on a particular timetable, than the minute that you: a) start thinking about finding office space, and b) can afford it, is the ideal time to start browsing and doing some research. Leasing an office space is a major decision. You don't want to feel rushed into making one you'll potentially regret later.
3. Work with a broker.
Technically, you could arrange to lease an office space yourself, but it's not the recommended course of action. The process of actually finding and visiting spaces that suit your needs can be time-consuming and cumbersome, like searching for an apartment but more complex. And if you're fortunate enough to find the ideal space this way, you will still want someone who can negotiate the best possible deal on your behalf.
Enter brokers. They curate listings for you based on your criteria and facilitate all aspects of the leasing process. One caveat to be aware of, however: In the traditional model, brokers represent building owners and landlords, not tenants. Their job is to negotiate the best deal for their client. Not you.
Tenant brokers, on the other hand, are an appealing option; just be wary of those who limit your visibility into the market and/or try to simply close quickly on a deal. That is not necessarily the best deal for you. A salary-based tenant broker, in that case, is worth investigating.
4. Bring a checklist on tours.
One of the biggest challenges in touring multiple office spaces is keeping track of all the property details and making sure you have the most accurate information on each listing. For example, does the price on the listing reflect the price for all "rent-able" space (which includes common building areas like lobbies, elevators, restrooms and hallways), or just the usable space your office will occupy? How are utilities priced?
If there's an issue with the space, is the property manager on-site or 90 minutes away? What's the building's infestation history? There are literally dozens of site features or factors you'll want to cover when you visit a site. But, crucially, you'll want a convenient way to remember them. It's worth bringing a checklist -- as detailed as you want to make it -- to each site to make sure you have all the bases covered. And of course, your broker can help you manage all these details as well.
5. Talk to peers who have done it before.
If you've never leased office space before, consulting peers who have undertaken the process is highly recommended. Articles like this one are no substitute for hearing firsthand accounts from people you trust and respect, about the highs and lows of the task. Your network can not only make recommendations on which neighborhoods or brokers to consider -- it can yield practical insights on what to expect at each stage of the leasing process.
And, though it is a process, it's one that should be immensely rewarding in the end.
Office Developers Hold Off on Speculative Construction for Now
Though demand for office space continues to improve, industry experts say it’s still too early to expect a surge in speculative construction in the sector. Office developers are watching constructions costs rise and sensing some lingering caution from corporate executive teams, leaving them reluctant to build on a speculative basis.
Office hiring is still strong. National employment increased by 160,000 jobs in April, with professional and business services hiring 65,000 workers in fields requiring college degrees, such as accounting and design trades, and financial services adding 20,000 employees, according to a report by brokerage firm Marcus & Millichap.
Financial markets were fickle during the first quarter, but stabilized in April, according to a recent CBRE office trends report. While there was a slight decrease in net absorption toward the end of the quarter, there was an acceleration in office-using job growth, signaling stronger tenant demand for the rest of the year, according to Andrea Cross, CBRE’s head of office research for the Americas.
“Office leasing has seen 26 quarters of positive growth, I would say the demand side is still holding up,” she says. “The growth we’re seeing now is in the markets that had been lagging after the recession, those in the Sun Belt where housing had trouble. The growth is not just San Francisco anymore, we’re even seeing it in Phoenix and Florida, and even the Carolinas are gaining strength.”
In fact, primary markets are seeing somewhat of a slowdown, at least from the strong gains made in the past couple of years. Construction is catching up to demand in cities including New York, where there was 25 million sq. ft. of class-A space available at the end of 2015, including 18 million sq. ft. in Midtown, according to a recent report by real estate services firm Savills Studley. Rent increases in New York slowed considerably in late 2015 and concessions have increased, according to Keith DeCoster, director of U.S. analytics at the firm.
“We are witnessing the early and tentative stages of transition from a landlord’s market to a tenant’s market, particularly in Midtown,” he said in a statement about the report.
Other markets with high construction volumes include Atlanta, with several million square feet of creative space and Houston, which is already suffering from losses due to low oil prices.
However, new office development is still muted in most of the rest of the markets, and Marcus & Millichap projects that net national absorption will reach 87 million sq. ft. this year, surpassing expected 2016 completions. Construction has been kept in check due to increased construction costs and a lack of available land, according to CBRE.
The tightening in space availability, particularly for big blocks of space in some markets, has led to tenants exploring well-located class-B properties, Cross says. Investors and developers are now chasing these properties in top markets for quick redevelopment opportunities. For example, Invesco Real Estate and Second Street Ventures just sold the 546,833-sq.-ft. Apollo at Rosecrans office campus in El Segundo, Calif. following a recent high-end renovation.
“I think there’s still enough caution to keep speculative office development at a minimum, you’re much more likely to see build-to-suit for those tenants who need big-block space,” Cross says. “Because of the higher construction costs, we’re going to need to see rents rise higher in most markets to experience a surge in speculative space.”
Neighborhood Spotlight: Creatives, walk this way to trendy, midcentury-modern Silver Lake
One of L.A.'s older streetcar suburbs, Silver Lake first developed as Ivanhoe, a transit-oriented stretch of homes and shops clustered on either side of Sunset Boulevard that was a short Pacific Electric Red Car ride from downtown.
That was in the early 1900s, when cars were rare and walkability was at a premium, so much so that a system of public staircases was built to provide hilltop dwellers easy access to the businesses and streetcar stops on Sunset.
The evocative name we know the neighborhood by today is a nod to former Water Board Commissioner Herman Silver, for whom the larger of the two William Mulholland-designed reservoirs at the heart of the neighborhood was named (the smaller carries on the historic "Ivanhoe" name).
By 1915, with the reservoirs complete, the northern end of the neighborhood annexed by the city, and a new bridge across the Los Angeles River providing easy access to Glendale and Atwater, Silver Lake began to see more development outside of the urban strip along Sunset Boulevard.
Then, as now, killer views and convenience to downtown and Hollywood made it a popular neighborhood for creatives, who commissioned homes designed by a veritable who's who of notable Southern California architects including Richard Neutra, John Lautner, Gregory Ain and many other greats. Their dramatic hillside homes — often cantilevered, always stylish — made Silver Lake a showcase of midcentury-modern design.
The innovative architecture was a reflection of the progressive nature of the neighborhood. Silver Lake has a long history of tolerance; it's historically been popular among the LGBT community, and the end of racially restrictive covenants in the 1940s opened up housing choices for minorities across the city, with many making a home in Silver Lake.
Though the Red Cars are long gone, Sunset Boulevard is still an extremely walkable oasis, with trendy restaurants, boutiques, and bars stretching from Los Feliz to Echo Park. The reservoirs are currently undergoing a modernization process that may convert them into a promenaded recreation area akin to Echo Park. And the homes that define Silver Lake style are as in demand as ever — with prices to match.
Urban vibes: The southern half of Silver Lake is a dense, bustling shopping and entertainment district, where within a few blocks you can grab a coffee, hit the farmers market, meet friends for brunch and later that night catch a live band — all without getting in your car.
Run and relax: The reservoirs are a great place to jog or walk your dog — and if plans for a revamped park on the site are realized, Silver Lake could become your next favorite place to lie in the sun.
Midcentury-modern heaven: Sure, there are plenty of beautiful Spanish colonial revival homes in Silver Lake, but those glassy boxes in the hills are the real draw for arch-nerds.
Once again, gentrification rears its ugly head. When soaring demand meets low inventory, something's gotta give, and that often means longtime residents become priced out. Many neighborhood activists are also concerned about out-of-scale in-fill development and mansionization.
John Galich, an agent with Rodeo Realty, said a lack of move-in-ready properties is one of the biggest challenges his clients face when buying in the area.
"There's not as much competition as there was a few years ago," he said, "but there's also much less quality inventory available."
Still, Galich sees no diminishing level of interest in the neighborhood known for its urban singularity and creative backbone, particularly among out-of-area clients.
"The majority of my buyers transferring from New York are in some sort of creative field," he said. Silver Lake "reminds them of everything that New York was."
Portions of the 90026, 90029 and the 90039 overlap the Silver Lake area. In March, based on 27 sales, the median price for single-family homes in the 90026 ZIP Code was $899,000. In the 90029 ZIP Code, based on 4 sales, the median price was $695,000, and in the 90039 ZIP Code the price was $850,000 based on 14 sales.
Ivanhoe Elementary, one of the area's most coveted public schools, topped the list with 944 out of 1,000 in the 2013 Academic Performance Index. Thomas Starr King Middle came in at 843 and Allesandro Elementary scored 839. Micheltorena Street Elementary had a score of 741.
DTLA — People who live and work in Downtown Los Angeles have long asked for a change at Pershing Square, which was originally a park filled with greenery, but for several decades has been better described as a parking garage with a faded concrete plaza.
Now, the path to a greener and more vibrant park is in play. This morning, the nonprofit Pershing Square Renew and 14th District City Councilman José Huizar announced that the Paris-based Agence Ter has won a bidding competition to redesign the park in the heart of Downtown.
Agence Ter beat out three other finalists. The team’s design features large expanses of grass in the center of the property, with hardscaped plazas and other gathering spaces dotting the perimeter.
"From the very launch of Pershing Square Renew, our goal was to create an open, warm and inviting design that was focused on serving people and not form," Huizar said in a prepared statement, "one that would allow Pershing Square, the city's oldest park, to reclaim its place as the true heart of Downtown Los Angeles."
The most dramatic feature is the “smart canopy,” a lengthy shade structure that would run along Hill Street from Fifth to Sixth streets. The slats of the canopy would light up at night to create what the firm has described as a “digital fireplace.” Underneath would be several flexible spaces for cafes, pop-up restaurants, a visitor’s center and more.
Another plaza would sit on the Sixth Street side of the park, while the western edge would hold smaller gardens with edible plants, water features and more. The central “Great Lawn” would host concerts, film screenings and other community events.
The firm and its partners will work with Pershing Square Renew to finalize designs while the nonprofit searches for funding. While each team had to keep to a $50 million construction budget, only a small portion of the funds has been secured.
The selection of Agence Ter marks the culmination of a design competition that began last summer, when Pershing Square Renew asked architects and landscape designers from around the world to reimagine Pershing Square. Dozens of applicants were whittled down to four; those teams presented their final designs to the public at a splashy event at the Palace Theatre on April 28.
Two weeks later, after having asked for public feedback, the jury for Pershing Square Renew has made its final choice. Pershing Square Renew officials said choice was unanimous between the jury and the public.
Calabasas’ fast-growing commercial real estate brokerage business Marcus & Millichap Inc. ended its first quarter with a double-digit jump in profit and a new chief executive.
Net income rose 8 percent to $14.8 million (38 cents a share), compared to $13.7 million (35 cents a share) for the year-ago period. That beat analysts’ estimates of 28 cents a share, according to Thomson Financial Network.
Quarterly revenue jumped nearly 12 percent to $164 million and exceeded analysts’ estimate of $145 million by more than 13 percent.
On March 31, the last day of the quarter, Senior Executive Vice President Hessam Nadji took over as chief executive, replacing John Kerin, who retired.
A modestly but steadily-growing economy and healthy real estate fundamentals provided a positive market backdrop for the company during the quarter, Nadji said.
“Our $1 million to $10 million private client market segment registered healthy results, which points to additional market share gains,” he added.
Marcus & Millichap reported results after market close Thursday. Shares closed Friday up $1.86, or 7.6 percent, to $26.45 on the New York Stock Exchange.
A 24,000 square-foot-medical and office park in Palmdale has been sold for nearly $5 million, according to commercial brokerage firm Lee & Associates – LA North/Ventura Inc. in Sherman Oaks.
L.A.-based private investment group Valerio Court bought the Challenger Business Park at 450 to 460 W. Palmdale Blvd. in the western part of the city for $4.78 million from Martin Properties Inc. in Westlake Village, which developed the complex in 2009. The park sits across the street from the Palmdale Regional Medical Center, around which another developer is planning a 420,000-square-foot wellness village with outpatient services, retail, restaurants, a hotel and eventually residential units.
The land has a long-term lease that runs through 2061, according to John Battle, managing director of Lee & Associates, and who negotiated the deal on behalf of the seller.
The park’s main tenant, the Torres Martinez Desert Cahuilla Indian Tribe, leases just over 13,000 square feet for social services. Progressive Physical Therapy Inc. is also a tenant, according to Lee & Associates.
“The ground lease was very attractive to potential buyers because it allowed for a very high cash-on-cash return of over 15 percent,” Battle said. “Additionally, the existing tenants are stable, long-term occupants with triple net or modified gross leases so the operating costs are lower than they would be for typical office properties with full service gross leases.”
Morrison Appointed to President of CBRE Global Investors' US Managed Accounts Group
CBRE Global Investors has named Dave Morrison as president of its U.S. Managed Accounts Group, the firm's $9.8 billion investment management services platform that caters to its largest investor clients through tailored separate accounts and open-end fund vehicles.
Morrison joined CBRE Global Investors in 2011 as global head of strategy, where he oversaw the firm's investment and corporate strategy functions while serving as a member of the global executive committee, global investment committee and the investment committee for the Americas.
Morrison will be transitioning his current corporate strategy responsibilities to Danny Queenan, chief operating officer, while continuing to serve as head of strategy and research for the Americas region.
"This appointment is part of our effort to make CBRE Global Investors truly a ‘world-class’ organization," said Ritson Ferguson, CEO of CBRE Global Investors. "Dave is well-qualified to lead and grow our U.S. Managed Accounts program. He has not only proven himself as head of strategy and a member of the global executive committee but also has extensive experience as an investor. As part of our ongoing effort to further strengthen our ability to deliver industry-leading performance and solutions to our investor clients, we are pleased to be able to more fully dedicate Dave to investment strategy, oversight and implementation."
Before joining CBRE Global Investors, Morrison served as co-chief executive officer of the prime property fund and global head of real estate strategy for Morgan Stanley Real Estate, where he was responsible for a $10 billion U.S. property fund and management of global strategy and research. With more than 25 years of industry experience, Morrison previously served as a portfolio manager with TIAA-CREF's real estate investing division and as vice president of real estate investments of Cornerstone Real Estate Advisers.
Morrison earned a bachelor's degree in American studies from Williams College and holds an MBA in finance from Fordham University.
When we think about the evolution of office spaces, our minds often go to recent innovations: shared workspaces, open floor plans and increased worker mobility.
But meeting rooms, too, have kept up with the pace of change. More than just a space that offers the obligatory long table, today’s conference room boasts video conferencing tools, well-designed furniture and interactive whiteboards. These conference rooms can be key locations where employees can innovate, collaborate and inspire.
In a business environment where space is at a premium, every room has to be thoughtfully designed. Oftentimes, this means creating more small meeting rooms as opposed to investing in large boardrooms. After all, 59 percent of meetings involve only two to three people. In other workspaces, it may mean creating flexible, multipurpose areas that can be sectioned with moveable walls.
It all starts with understanding employee needs and working habits. Sofia Fonseca, a vice president at HOK in charge of the architecture firm’s workplace strategy pre-design solutions, says that this understanding is paramount when building an ideal office environment.
Technology and Modularity
According to Fonseca, not all meetings are created equal. A company’s culture and how formal the meetings tend to be, help to define the space. Some companies are comfortable with informal chats while lounging in open areas. Others require more privacy.
Of course, in-person meetings demand a different set of requirements than remote ones, where employees need equipment for conference or video calls. “Modern meeting rooms should include rich technology options so that you can connect remotely, since we live in a global economy,” Fonseca adds.
When it comes to smart use of meeting space, adaptability is the name of the game. “Keep it modular. On one wall, it may make sense to have a smart board. But it’s just as important to be able to have furniture you can move to provide a variety of setups,” Fonseca says. The more collaborative the meeting, the more modular the room should be.
No One Size Fits All
According to Fonseca, it’s important for designers to understand the purpose of the space and choose furniture that works within its “envelope” of walls, since there’s no such thing as a one-size-fits-all conference room. That means finding the right balance of things, such as writable surfaces that can run floor to ceiling, and glass walls that let in light but also use shades for privacy or projectors.
“We collect information up front from an organization,” she says. “We make, literally, a menu for what would make a successful conference for them. It needs to really be tied to their culture and what fits them.”
When it comes to meeting room placement, it’s not just about convenience. Much of it is also about daylight. Fonseca says that while a meeting room with a great view can be used by a company for showmanship, she recognizes that “access to daylight is becoming a premium.” A great conference room with sweeping views may block daylight from other parts of the office. However, meetings that take place with natural sunlight tend to be quicker and more efficient.
Striking a Balance
Balancing all the different priorities in terms of work space versus meeting space can be difficult, but it is possible. When organizations focus on what fulfills their employees’ needs in addition to aesthetic and collaboration best practices, the results can be transformative.
Companies are striking this balance across the world. CBRE in the Czech Republic recently announced the winners of a competition for Meeting Room of the Year. This year’s winner was J & T Banka, a bank with offices in Prague. The competition featured examples of beautiful-yet-functional meeting rooms, which can be viewed in the below slideshow.
South Bay Retail Center Refinanced with $17 Mil Loan
Hawthorne Xchange, a 63.8k sf, neighborhood shopping center in Hawthorne, has been refinanced with a new $16.9 mil, 10-year loan. The borrower, a local investor operating as Howard Building LLC, manages a portfolio of approximately 300k sf of commercial and retail office space in Southern California. Located at 2831 - 2909 W 120th St, Hawthorne Xchange was built in 2005 as part of The Exchange master planned development. Shadow-anchored by Lowes Home Improvement and Target, Hawthorne Xchange is 100 percent leased with a rent roll that includes several national credit tenants such as Sprint, Starbucks, Sears Appliance and 24 Hour Fitness. The retail center benefits from its location near roughly 1 msf of redeveloped industrial and commercial office space, including the headquarters to Space X and Tesla.
Mike Yim and Jonathan Hakakha of Quantum Capital Partners arranged the financing. The loan, amortized over 30 years, is fixed at 4.00%, which Quantum was able to lock in at application. The loan proceeds will be used to retire the maturing debt assumed by the borrowerwhen it acquired the center from Danros Inc in March, 2015 for $25 mil.
“We originally identified several CMBS lenders for the financing but the volatility in the conduit spreads led us to different capital providers,” said Yim. “There was robust interest from a number of non-CMBS financing sources and we identified a credit union that was willing to offer a long-term fixed rate loan at an attractive rate.
May 13, 2016
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