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Equity Office Daily Brief: April 30, 2018

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Daily Brief

April 30, 2018

  EquilityOffice

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As steel tariffs squeeze U.S. businesses, uncertainty threatens economic growth

L.A. Times

 

"We're in the dark, just like everybody else," said an executive of a West Coast steel importer. "This administration has been supposedly pro-business, but business doesn't like uncertainty," groused a distributor of stainless steel, who, like others, requested anonymity to avoid antagonizing...

 


Belkin Buy Raises $866M Question

Los Angeles Business Journal

 

Foxconn Technology Co. Ltd.’s recent buy of Belkin International Inc. in Playa Vista sets up a balancing act for the Taiwan-based behemoth of contract manufacturing and key supplier for Apple Inc. Foxconn signaled it has ambitions of its own in the U.S. with...

 


County Seizes 4.2-Acre Lot in South L.A., Mixed-Use Project Planned

Los Angeles Business Journal

 

Los Angeles County has won court approval for its effort to seize a blighted 4.2-acre lot at Vermont and Manchester avenues in South Los Angeles. In December 2017, the county sued to condemn the property, the site of a former swap meet...

 


California's record low unemployment is far from perfect

OC Register

 

California’s official unemployment rate may be at historic lows but there’s still plenty of work to do. When we typically talk about unemployment trends, we speak of gyrations in the “official” jobless rate. It’s a benchmark based a monthly survey of households...

 


Free Address Office Sits Well With More Companies

San Diego Business Journal

 

San Diego — Carissa Wisniewski as a managing partner of Moss Adams runs the company’s San Diego operations, but she doesn’t have a fancy corner office. She doesn’t even have a desk to call her own, and that’s the way Wisniewski likes it. Moss...

 



BLOG & ONLINE NEWS

 

Cruzan pays $69M for Rodeo Realty HQ in Beverly Hills

The Real Deal

 

Rodeo Realty has a new landlord. The private equity firm Cruzan paid $69 million this month for the office building at 9171 Wilshire Boulevard in Beverly Hills, property records show. Rodeo, a residential brokerage, leases space for its corporate headquarters there. Mesa West provided...

 


Inside El Segundo's Smoky Hollow Redevelopment Project

Globe St.

 

El Segundo has revealed plans to overhaul the Smoky Hollow district, a 120-acre site between Pacific Coast Highway and historic Downtown El Segundo. The area has recently emerged as a creative hub. The new Smoky Hollow Specific plan will encourage more...

 


LeaseLock Lands $10M To Eliminate Security Deposits For Rentals

SoCal Tech

 

Los Angeles-based LeaseLock, a new startup that offers up an insurance product which eliminates the need for a security deposit for renters--in exchange for a monthly payment--has raised $10M in a Series A funding round. The company said the funding came from...

 


Coworking Heats Up in Suburban Los Angeles

Commercial Observer

 

Downtown Los Angeles might be the go-to for coworking, but in L.A.’s suburban markets, shared workspace is gaining a significant foothold, according to new research from Cushman & Wakefield. And increasing the demand in these areas are companies relocating to the suburbs...

 


San Gabriel Valley Office Asset Trades for $1,000/sf

RENTV

 

Sukut Investments, a private, high net-worth investor, paid $10.85 mil for a 10.6k sf ($1,024/sf), Class A office property in the San Gabriel Valley. The property, located at 4000 Arden Drive in El Monte, is 100% leased to the State of...

 


Portland's Centrl Office to Set-Up Co-Working Space in LA's Little Tokyo

RENTV

 

Portland-based Centrl Office, a provider of collaborative co-working office space, has agreed to a 10-year lease for 29k sf in Little Tokyo’s Brunswig Square in downtown Los Angeles.The lease value was not disclosed.  Located at the intersection of Second Street and Central...

 

FULL TEXT


As steel tariffs squeeze U.S. businesses, uncertainty threatens economic growth

L.A. Times

 

"We're in the dark, just like everybody else," said an executive of a West Coast steel importer.

"This administration has been supposedly pro-business, but business doesn't like uncertainty," groused a distributor of stainless steel, who, like others, requested anonymity to avoid antagonizing officials.

These should be good times for American manufacturers, construction firms, canners and others that use industrial metals for their business. The U.S. economy is perking along, and tax cuts and global growth are helping boost demand.

But since President Trump abruptly slapped hefty tariffs on billions of dollars' worth of imported steel and aluminum on March 23, the outlook has turned hazy for many — downright bleak for some.

The tariffs have brought higher prices for many manufacturers and construction firms and considerable uncertainty for both importers and domestic manufacturers of steel and aluminum.

When Trump issued the tariff orders, he gave temporary exemptions to a handful of the biggest steel and aluminum exporters to the United States, including Canada, Mexico, Brazil and the European Union. But those exemptions are set to expire on Tuesday.

At the same time, the Commerce Department is supposed to rule on hundreds of requests for exemptions from U.S. manufacturers who say that domestic firms can't supply the particular types of metals they need.

As of the weekend, the Commerce Department had posted tariff-exclusion requests for about 650 steel importers, but roughly 5,000 more hadn't been publicly listed on its website, including some that were submitted more than a month ago.

Commerce officials haven't explained what's causing the delays, but they could be costly for businesses. That's because if a user of imported steel gets a tariff exclusion, it would be retroactive to the date on which its request was posted.

California Steel Industries, which buys slabs from Brazil, Mexico and Japan, submitted a waiver request on March 26. It's still waiting for its submission to be posted, said Brett Guge, executive vice president of the Fontana-based company. He won't comment on how the tariffs have affected business so far, but he made clear that the uncertainty is a problem.

"If we could get out from this cloud over our heads, we'll have a good year," he said.

The Commerce Department says it would take 90 days to review an application, but the agency will be hard pressed to meet that time frame given the thousands of requests in the pipeline.

An extension or permanent exemption of the tariffs for Canada, Mexico and others would ease Commerce's workload and help end users in the U.S., but no one knows which countries will get relief or on what basis that decision is being made.

"You'll know when the president makes his announcement," was about all that Commerce Secretary Wilbur Ross would say Friday when asked about the tariff exemptions at a business journalists' conference in Washington.

Additional temporary exemptions will keep companies in limbo. Some are scrambling to find alternative sources for the steel and aluminum they import. Others say they may have little choice but to stick with the same supplier and eat the tariffs.

Domestic substitutes are not readily available for businesses like Mapes Piano String Co. in Tennessee, which buys premium-quality wire rod from Japan.

ARC Automotive says no steel producer in the U.S. has the equipment to make the high-performance tensile-strength tubing it uses to manufacture its air-bag inflator.

"It is our desire to support strong domestic tinplate production," Seneca Foods Corp., the largest U.S. vegetable canner, said in its letter seeking an exclusion from tariffs for its imports of metal from China. After meeting with its two domestic suppliers, Seneca said, it was unclear whether they have the ability or the willingness to expand tinplate production.

Trump's metal tariffs, 25% on steel and 10% on aluminum, are meant to protect domestic producers from foreign competition. The president issued them in the name of national security. But while the penalties may bring more business to U.S. mills, the companies which buy metals to manufacture products and construct projects have started to feel the sting of higher prices and supply disruptions.

For commercial builders, the cost of rebar and other metals already have gone up 15% to 20% from early this year. On fixed projects, that's the difference between making a profit or losing money, said Brian Turmail, a spokesman for Associated General Contractors.

U.S. steelmakers say fears of supply shortages are unfounded, but there's widespread uncertainty and confusion about what lies ahead.

Mexico and Canada could well get an extension as they work toward a deal with the United States to revamp the North American Free Trade Agreement.

Others may not be so lucky. French President Emmanuel Macron and German Chancellor Angela Merkel, in visits last week to Washington, tried to persuade Trump to lift the tariffs, but apparently to little avail. That means the EU could soon fire back with counter-tariffs on a range of U.S. exports.

If history is a guide, they will target iconic American products such as Kentucky whiskey, denim jeans and Florida orange juice, to put maximum political pressure on U.S. lawmakers.

The EU accounts for about one-fifth of all U.S. steel imports, which were about $29 billion in 2016. Canada is the largest individual supplier of steel to the United States. Total imports of aluminum were about $13.6 billion in 2016, of which more than 40% came from Canada.

If the tariffs are made permanent, the effect on prices and supplies will ripple through many industries, some of which will be passed on to consumers.

Given the size of the American economy — steel and aluminum account for only about 2% of total imports — the overall impact to the national economy figures to be relatively modest. Researchers at the Federal Reserve Bank of Dallas estimated a long-term hit of a quarter of a percentage point to U.S. gross domestic product.

A full-fledged trade war, however, would have a much larger effect.

"Depending how reactions unfold, there could be potent implications for economic activity," said the Dallas Fed's Michael Sposi and Kelvinder Virdi. And this doesn't include the administration's looming, potentially far more costly trade conflict with China.

Domestic metal producers have urged Trump not to let up on the pressure. "Tariffs should be imposed for any country that does not agree to negotiate quotas," said Mike Bless, chief executive of Century Aluminum, in a statement over the weekend. Century is banking on the tariffs to help it restart idled lines at its Kentucky smelter and bring back 300 jobs.

Even for domestic producers, however, uncertainty about the status of the tariffs has created problems.

"There needs to be no more delays, no more extensions on this," said John J. Ferriola, chairman and chief executive of the Nucor Corp., a major steelmaker in the U.S.

In a conference call April 19 with analysts, he said it was hard to predict what would happen. Either way, he said, "I can assure you, there's going to be no shortage. There's a tightness in the marketplace certainly. That's a result of demand improvement. The economy is better. Demand is up."

"If steel needs to come into the country, it will come in," he said. "People will pay the tariff, and they'll bring the product in, and they'll bring it in a fair price."

-Don Lee

Belkin Buy Raises $866M Question

Los Angeles Business Journal

 

Foxconn Technology Co. Ltd.’s recent buy of Belkin International Inc. in Playa Vista sets up a balancing act for the Taiwan-based behemoth of contract manufacturing and key supplier for Apple Inc.

Foxconn signaled it has ambitions of its own in the U.S. with the $866 million deal announced last month, which gives it an established consumer brand of cables and accessories for Apple’s iPhone. The move doesn’t necessarily point to a collision course with Apple, but it does put Foxconn into its biggest customer’s domestic market.

Playa Vista-based Belkin’s recent performance – $4.7 million in earnings on $780 million in sales last year came to a razorthin margin of 0.6 percent, according to a Bloomberg report based on filings in Taiwan – has some observers calling it an overpay by Foxconn.

Others, particularly in the venture capital community, see the possibility of a larger strategy, with Belkin’s namesake brand and several others the company has acquired over the years as the underpinning.

“Hearing their lack of earnings, it seems like a steep price,” Eric Schiffer, president of Tech Coast Angels Los Angeles said.

“What Foxconn does get by buying Belkin is distribution of Belkin’s products in a lot of retailers. They could expand that product line. It’s tough to get in to begin with.”

Neither Belkin nor Foxconn would speak on this matter beyond their press releases.

Retail shelf space would be new for Foxconn, which until now has made products for other brands. Nearly half of its $158 billion in annual revenue is tied to manufacturing iPhones.

Belkin’s brand isn’t on par with Apple or other tech giants, but it is a household name for iPhone accessories such as cases, chargers and cords. It goes beyond its namesake product lines with routers, smart home devices and other gear under the banner of Linskys, Wemo and Phyn – giving Foxconn four brands for the price of one.

“Foxconn needs brand and distribution in the U.S.,” said William Hsu, partner at Mucker Capital. “They can’t be a contract manufacturer forever. That’s a low margin business with a limited lifespan.”

How much Belkin’s stable is worth remains to be seen. Linskys, the most notable brand of the four, was salvaged by Belkin in 2013 in what some analysts believed was a fire sale by Cisco Systems Inc. The Silicon Valley-based gear outfit bought router maker Linskys in 2003 for $500 million, but never managed to make sense of the unit. Linksys slumped after an illtimed push to diversify into handheld cameras – a brief trend that was overtaken by smart phones.

Tech Coast Angels L.A.’s Schiffer points out that the $866 million purchase price for Belkin is a relatively small risk with potentially big rewards for Foxconn. Belkin isn’t the top of its class – “certainly not a premium brand compared to Rocketfish,” Schiffer said – but it does have a place in the U.S. retail market.

The deal also comes with Foxconn well on its way to establishing a manufacturing presence here, with a $10 billion factory in Wisconsin in the works.

“The U.S. government has been placing limits on foreign companies buying U.S. electronic companies,” Schiffer said. “It could make them more of a U.S. based company with the Belkin subsidiary. If they’re viewed more as a U.S. company than a Taiwanese company, maybe they’ll be allowed to do more deals in an area the U.S. government views as sensitive” (see related coverage, CFIUS, page 5).

The prize at stake in the balancing act Foxconn appears to have taken on with Belkin could be a reduction of its dependence on Apple.

“If you’re running a business and half your business is from one customer, it’s scary,” Schiffer said. “If that customer decides not to work for you, you go under. It makes sense for them to diversify.”

An overreliance on one customer also diminishes leverage on pricing in the already lowmargin business of wholesale manufacturing.

Potential threat?

Foxconn’s newfound ability to sell consumer products related to the iPhone could lead Apple to view it as a potential competitor. Belkin already sells products through the Apple Store, and Foxconn Chief Executive

Sidney Lu made it clear that selling smart home products is a priority – calling out a segment that would allow it to sell through, rather than compete with, Apple.

“Integrating Belkin’s best-in-class capabilities and solutions into FIT (Foxconn Interconnect Technology Limited, a subsidiary of Foxconn), we expect to enrich our portfolio of premium consumer products and accelerate our penetration into the smart home,” said Lu in a prepared statement.

Schiffer said Apple is unlikely to view Belkin as a threat for now, but that could change if Foxconn applies its manufacturing expertise to boost the quality of its newly acquired brands’ offerings.

“The Apple brand charging cords all sell at a premium price,” Schiffer said. “I don’t know if they’re going to view it as a competitive thing at this point because they don’t have the same consumer perception. But if Foxconn decides to add a premium brand, that might not go down so well.”

Pipkin’s role

Chet Pipkin, founder and chief executive of Belkin, will stay on and continue to operate Belkin as a subsidiary of Foxconn.

“This move will accelerate our vision of delivering technology that makes the lives of people around the world better, moreconvenient and more fulfilling,” Pepkin said in a statement.

Pipkin owned 95 percent of the company, with the other 5 percent belonging to Boston, Mass. private equity firm Summit Partners.

“We’ll leverage its worldclass manufacturing capability to enhance Belkin’s operating efficiency and competitiveness,” Pipkin said. “The transaction also grants us access to more resources to invest in our people and to aggressively pursue opportunities in the marketplace.”

Pipkin could not be reached for additional comment, and is known for keeping a low profile. Since founding Belkin in 1983, he has been active in the Los Angeles community, serving on the boards of local nonprofits including Wiseburn 21st Century Charter Schools, Da Vinci Schools, YMCA of Metropolitan Los Angeles, and Children’s Hospital Los Angeles.

-Eli Horowitz

County Seizes 4.2-Acre Lot in South L.A., Mixed-Use Project Planned

Los Angeles Business Journal

 

Los Angeles County has won court approval for its effort to seize a blighted 4.2-acre lot at Vermont and Manchester avenues in South Los Angeles.

In December 2017, the county sued to condemn the property, the site of a former swap meet that went up in flames during the 1992 riots.

The ruling by Los Angeles County Superior Court Judge Daniel Murphy allows the county to develop a mixed-use project that includes a transit plaza in the area, which has sat undeveloped since 1992, according to a statement from the office of Los Angeles County Supervisor Mark Ridley-Thomas.

In a statement, Ridley-Thomas said the county was taking an “out-of-the-box approach” to “providing jobs, quality education, transportation and the development of affordable housing at the site.”

The property’s owner, Sassony Commercial Real Estate Co., has blasted the seizure of the land as unjust and that the county lacked the authority to take the property by eminent domain.

In 2015, the Sherman Oaks-Sassony, which is owned by Eli Sasson, announced a proposal to develop the Vermont Entertainment Village, a 200,000-square-foot center with restaurants, and banquet hall and stores surrounding an open air plaza.

-Ciaran McEvoy

California's record low unemployment is far from perfect

OC Register

 

California’s official unemployment rate may be at historic lows but there’s still plenty of work to do.

When we typically talk about unemployment trends, we speak of gyrations in the “official” jobless rate. It’s a benchmark based a monthly survey of households that determines who’s counted in the workforce, who’s working — and who is not. The rate is a simple percentage: those officially “unemployed” divided by “all” workers.

While we haven’t previously seen such low levels of unemployment, a trusty spreadsheet with unemployment statistics plugged in reveals continuing job market challenges …

What the “official” rate says: California averaged 4.8 percent unemployment last year. That’s lower than the boom years of 1989 (5.1 percent); 2000 (5 percent); and 2006 (4.9 percent). Still, California last year trailed the U.S. rate of 4.4 percent and tied Delaware and Pennsylvania for the nation’s 12th highest unemployment rate.

Laggards and leaders: Alaska’s 7.7 percent unemployment in 2017 was the nation’s worst followed by the District of Columbia (6.2 percent) and New Mexico (6.1 percent). Best? Hawaii at 2.4 percent.

But the broadest definition of unemployment in that same survey — called “U6” by statisticians for its bureaucratic numerology — casts a wider net to define “unemployment.” This jobless metric includes all unemployed workers plus those folks in various stages of workplace frustration — from people discouraged about looking for work to people employed part-time but wanting full-time jobs.

What the broadest number says: California, by the broadest measure available, had 9.8 percent unemployment last year. While that’s less than half of 20-percent-plus readings during the Great Recession, it’s above the U.S. rate of 8.5 percent and tied with the District of Columbia for sixth-worst nationally.

Laggards and leaders:  Worst “U6” reading was in Alaska (13.2 percent) followed by New Mexico (11.3 percent); Nevada (10.8 percent); West Virginia (10.2 percent); and Connecticut (10.1 percent). Best? North Dakota at 5.3 percent.

Yes, that’s a noteworthy gap in jobless measurements. (It’s funny — sort of — when folks choose to shout about it!) Let’s call this difference between the official and broadest unemployment stats the dissatisfaction rate …

What the gap tells us: 5 percent of California’s workforce was technically somewhere between officially unemployed and not counted at all. That’s wider than the U.S. gap of 4.1 percent and the fifth-highest level of job-market “dissatisfaction” in the nation.

Laggards and leaders:  Worst “dissatisfaction” was found in Nevada at 5.8 percent followed by Alaska (5.5 percent); New Mexico (5.2 percent); and Connecticut (5.2 percent). Smallest? North Dakota (2.7 percent).

Yes, I know the entire unemployment math has its challenges. Still, it’s a solid yardstick for job market performance overall.

And don’t get me wrong. California continues to generate numerous grand employment opportunities. But that doesn’t mean every worker is getting what they need.

Look, some folks complain California is growing too fast. Others demand more clamps on business practices. And there are people who think everything’s peachy!

Remember, your financially struggling neighbors could still use a better job.

-Jonathan Lansner

Free Address Office Sits Well With More Companies

San Diego Business Journal

 

San Diego — Carissa Wisniewski as a managing partner of Moss Adams runs the company’s San Diego operations, but she doesn’t have a fancy corner office.

She doesn’t even have a desk to call her own, and that’s the way Wisniewski likes it.

Moss Adams, an accounting, consulting and wealth management firm, is among a number of companies in San Diego and elsewhere adopting a complete or partial free address system where all or most workers don’t have an assigned desk.

In a recent nationwide survey of corporate real estate executives by the commercial real estate brokerage firm CBRE,

52 percent of the 138 who responded said they anticipate implementing some level of unassigned seating within the next three years, and 14 percent said they would convert their office space so that all of it would have unassigned seating.

Millennials Bring Change

“The labor is demanding it, we have a new workforce of these millennials,” said Andrew Ewald, a first vice president and tenant representative leader at CBRE.

“They’re just wired differently. They want to have a sense of community and collaboration,” Ewald said. “Employees are happy. They feel like they have a choice.”

Employers like the concept in part because a free address system requires less space than a traditional office setup, Ewald said.

“It’s a chance to reduce operating expense,” Ewald said. “If you can build a culture that has a flexible work environment, you can eliminate or reduce the need for excess office space.”

Moss Adams made the change to a free address system three years ago when it moved into new offices in UTC, which Wisniewski said has served as the model for the company’s Bay Area offices.

“When you look at how space was used historically, it was a place you were assigned to go and work in the same spot all the time and, depending on what level you were at, what that space would look like,” Wisniewski said.

The size and location of offices were status symbols.

A free address setup “enables you to be more mobile and it assumes you might be more effective sitting in different environments, in different spaces potentially with different people, depending on what you’re doing,” Wisniewski said. “It allows for someone to pick where they’re going to be most effective.”

Wisniewski said she’s never encountered a conflict with two people wanting the same space.

“There are plenty of spots/spaces with different features that make people want to come in and work in spaces with each other,” Wisniewski said.

For example, Wisniewski said if she wants a space with a double desk and one is taken, “I just move to the next double available. If I have a preference, such as facing the window, I move to the next double that faces the window.”

What could have been Wisniewski’s office in a traditional arrangement is a corner area dubbed the Top Gun Lounge where anyone can go to work or relax.

“I am more than happy to share it with other people,” Wisniewski said.

Although most people at Moss Adams don’t have assigned workspaces, “it doesn’t assume you close everything up and have to move every night,” Wisniewski said. People can use the same spot for as long as they need it to accomplish their work.

‘Open and Collaborative’

Illumina, a genomics company headquartered in San Diego, has adopted a hybrid office model it calls its “Work Anywhere” program in the i3 building at UTC.

“For those employees and job functions that require a work station and a dedicated and assigned desk, we will make sure they have that,” said Jenny Durbin, Illumina’s senior manager for facilities planning.

Others who spend much of their time working in groups, in conferences or out of the building choose where they work in Illumina’s i3 building space, depending on what they’re doing from day-to-day.

“Part of our values is that we’re open and collaborative. Our workplace should reflect our culture and values,” Durbin said. “You don’t work at a desk, you work at Illumina and you work in a variety of places.”

Every Illumina employee has their own laptop, which they can plug in wherever they work.

CEO Francis deSouza has an assigned workspace, but not a private office, Durbin said.

CBRE’s offices in UTC Westfield mall are fully free address, with no assigned work spaces for anyone, from executives to support staff.

People arrive in the morning and pick where they’ll work, from rows of desks to conference rooms to huddle rooms that are like large phone booths.

Lounge Area Option

They can also work in a large open lounge area or gather at small benches.

“There’s a tremendous amount of energy, there’s a tremendous amount of collaboration,” Ewald said.

Each day, the process starts over. CBRE brokers and other workers can use lockers to store whatever they need to keep on hand, but the work spaces are cleared from day-to-day.

The free address concept is not new.

Frank Wolden, principal of AVRP Skyport Studios, said he designed a version of free address offices about 10 years ago.

But AVRP Skyport Studios President Chris Veum said it’s becoming more popular with his firm’s clients in San Diego and elsewhere, including Amobee digital marketing, Red Door Interactive and Microsoft.

‘Hoteling’

In one version, called “hoteling,” workers don’t have permanent assigned desks but reserve space in advance.

Veum said AVRP Skyport designed offices with a hoteling system for Microsoft in Chicago, where the company had multiple locations with workers moving among them.

“You’d find out if there was space available online before you went in, then you could pick a desk. Every desk had a number,” Veum said.

Adapting to Change

There is a cautionary note to all of this — people who are used to working in more traditional office environments may need time and coaxing to adjust.

“You have to show them the benefits,” Ewald said. “You have to do some hand-holding.”

Sometimes, it’s a company’s upper echelon that needs the most hand-holding, Veum said.

He recalled meeting in a workshop with top-level executives at a North County company in which they outlined how many desks they wanted, where they wanted them and where various departments would be within the company’s space.

“They were kind of telling us where people were going to sit,” Veum said. “When we opened up the workshop and we started talking with people, it was so counter to what we just heard from the executives, it was hilarious.”

What the workers wanted was an open work area with the ability to pick where they’d work. “I was sitting there trying not to laugh,” Veum said.

-Ray Huard

Cruzan pays $69M for Rodeo Realty HQ in Beverly Hills

The Real Deal

 

Rodeo Realty has a new landlord.

The private equity firm Cruzan paid $69 million this month for the office building at 9171 Wilshire Boulevard in Beverly Hills, property records show. Rodeo, a residential brokerage, leases space for its corporate headquarters there.

Mesa West provided a $52 million acquisition loan on the five-story, 112,000-square-foot property.

The seller was the John Hancock Life Insurance Company.

The deal is San Diego-based Cruzan’s first venture into Los Angeles County, although its $240 million property portfolio includes Orange and San Diego, according to Real Capital Analytics.

The office sale is the second-highest in Beverly Hills this year, after CIM Group’s January purchase of the Union Bank of California Building (just up the street) for $132 million.

But not all office space is created equal. Cruzan paid about $560 per foot for the five-story building. The Union Bank building, constructed the same year in 1959, fetched more than $1,900 per foot.

Representatives for Cruzan, John Hancock and Rodeo Realty did not return calls for comment.

-Haru Coryne

Inside El Segundo's Smoky Hollow Redevelopment Project

Globe St.

 

El Segundo has revealed plans to overhaul the Smoky Hollow district, a 120-acre site between Pacific Coast Highway and historic Downtown El Segundo. The area has recently emerged as a creative hub. The new Smoky Hollow Specific plan will encourage more growth by allowing for adaptive reuse projects—a strategy that spurred major growth in Downtown Los Angeles. This will allow developers to convert industrial space into office space, increasing the existing office supply in the city by nearly 900,000 square feet by 2040. We sat down with Gregg McClain, El Segundo planning manager, to hear more about the new plan and how it will impact the city.

GlobeSt.com: What is the vision for the redevelopment of Smoky Hollow?

Gregg McClain: Smoky Hollow is slowly transitioning to a district characterized by creative offices, small studios and similar uses. Our present specific plan envisioned that the district would remain light industrial with a sprinkling of these other uses. In the past decade or so the light industrial uses are continuing to be replaced by design studios, creative and professional offices and the like. So with this update to the specific plan, we are trying to align our vision with what is happening organically. We want to capitalize on Smoky Hollow’s image to promote the transformation without the city being an obstacle due to its now outdated specific plan.

GlobeSt.com: What was the impetus to redevelop this site?

McClain: The impetus is that real estate market forces and the nature of how we work, shop and spend our free time are changing. We need to adapt to this reality or prepare to be passed over. El Segundo is lucky that past planning decisions and the blessings of geography have made Smoky Hollow so desirable today. Now we want to ensure the positive aspects of the area are preserved and hope to make changes to reduce negative impacts.

GlobeSt.com: Why have you chosen to focus on tech, entertainment and creative businesses for this site?

McClain: These are uses that are suited for the types of properties Smoky Hollow has to offer, mostly small lots with interesting buildings that can be beautifully repurposed. There are also many less desirable structures that are ready to be torn down and replaced. This mix results in an eclectic district that is now popular with tech startups and the entertainment businesses. El Segundo has also focused it economic development efforts on these sectors as a way to diversify the local economy.

GlobeSt.com: How will this project come together? Are you envisioning public-private partnerships, and if so, what has developer/investor interest been like?

McClain: Mostly the project will be developed incrementally through private developments. The City will focus on public improvements, such as redoing streets, sidewalks and parking. We are also implementing new zoning standards and streamlined processes of zoning applications that should stimulate development, or at least remove barriers that may be holding back some private investment.

GlobeSt.com: How will the redevelopment of Smoky Hollow impact/benefit the city?

McClain: Several ways. Increased business activity generated employment and revenues for the City. Smoky Hollow also plays an important role in the City’s identity and business-friendly reputation. Success breeds success, and Smoky Hollow already stands out as an example of a thriving, vibrant place to open or run a small business, we hope to amplify that image with this effort.

GlobeSt.com: What is the timeline for this redevelopment project?

McClain: The timing of getting the plan in place is being driven now by the environmental review process. We hope to see the plan at the Planning Commission before midsummer, and then to the City Council shortly thereafter. The earliest city projects, such as street improvements, could be next year. We will likely take an incremental approach so as to not overextend our resources. This could take many years to complete. Private property improvements will begin by the end of this year and be ongoing for as long as they make good sense for owners and businesses to invest in the improvements.

-Kelsi Maree Borland

LeaseLock Lands $10M To Eliminate Security Deposits For Rentals

SoCal Tech

 

Los Angeles-based LeaseLock, a new startup that offers up an insurance product which eliminates the need for a security deposit for renters--in exchange for a monthly payment--has raised $10M in a Series A funding round. The company said the funding came from Wildcat Venture Partners, Liberty Mutual Strategic Ventures, American Family Ventures, Moderne Ventures. The company lets renters pay a monthly fee to avoid having to put down a big security deposit, at rates starting at $19 per month. LeaseLock works directly with multifamily property owners, including Lennar Multifamily Communities (LMC), Avenue5 Residential, United Apartment Group, and Bainbridge.

Coworking Heats Up in Suburban Los Angeles

Commercial Observer

 

Downtown Los Angeles might be the go-to for coworking, but in L.A.’s suburban markets, shared workspace is gaining a significant foothold, according to new research from Cushman & Wakefield. And increasing the demand in these areas are companies relocating to the suburbs in search of a better talent pool and cheaper rents.

Illustrating the region’s coworking growth in suburban markets, C&W found that, of the nine total occupancies that have already occurred in 2018, eight have taken place outside the Central Business District in Downtown Los Angeles.

According to the report, the biggest players in Greater L.A. are Regus with 985, 554 square feet; WeWork with 928,795 square feet; Premier Business Centers with 462,992; Spaces at 265,715 (owned by Regus); and Cross Campus accounting for 123,186 square feet.

“There has been an increase in demand for this young industry,” Vincent Chang, an associate director of research at C&W, wrote in a company blog on the trend. “Landlords once hesitant to embrace the coworking concept have been signing deals with these companies for several floors and adapting to the new trend.”

According to statistics from the brokerage firm, the greater Downtown area, which includes the central business district and which includes the central business district (CBD) and the surrounding areas of South Park, Little Tokyo/Chinatown, Central City West, Historic District, Fashion District, and the Arts District, remains the top market for coworking companies with a total of more than 500,000 square feet of total or near-term occupancy in 2018.

Hollywood comes in second at more than 289,000 square feet, while El Segundo and the Beach Cities of the South Bay (Manhattan Beach, Hermosa Beach and Redondo Beach) are quickly advancing at third with nearly 250,000 square feet of existing or committed occupancy in the near term. These include Spaces’ recent lease agreement for 37,373 square feet in El Segundo within the newly rebranded OPENcampus at 360 North Sepulveda Boulevard with official occupancy expected within the next few months.

In terms of number of coworking locations, Greater Los Angeles leads with 11, followed by El Segundo and the Beach Cities with eight, Santa Monica with seven and Century City with six.

The South Bay, in particular, has trended well in recent years in the office market overall with the last three calendar years (2015 to 2017) absorbing a total of over 1.6 million square feet of office space—with 2015 and 2017 representing its highest growth levels since 2007 and 2016 following close behind. South Bay office net absorption was 629,400 square feet in 2015 and 534,000 square feet in 2017, with 464,700 square feet in 2016. The El Segundo/Beach Cities submarket served as a catalyst accounting for well over half of South Bay’s office growth in those three years. More companies are establishing a presence in the South Bay, C&W found, because the residential coastal community is heavily composed of corporate decision makers that often prefer an office location within a closer commute. In addition, rents in the area are still viewed as a relative bargain compared with other areas such as West Los Angeles.

“The differential in rental rates and pricing in the South Bay can range anywhere from 10 to 30 percent less than in West Los Angeles, depending on specific asset and class,” Tom Sheets, a senior director at Cushman’s South Bay office, told Commercial Observer.

The South Bay, in particular El Segundo/Beach Cities, now apparently also possesses a “cool space” factor, whereas less than a decade ago such desirable, modern space was virtually nonexistent. Following the 2008 recession, which resulted in high vacancies well north of 20 percent, institutional money poured in, investing a lot of capital to renovate many older buildings that created new high-quality office space that have attracted tenants. Players in the suburban region include Bixby Land Co., Rockwood Capital, Starwood Capital, Invesco, Tishman Speyer and Deutsche Asset Management.

“The institutional capital investment that has been made over the last several years has brought about significant and necessary change and evolution to the landscape of this area,” Sheet said. “Owners are now delivering repositioned, high-quality finished assets with modern efficiencies that offer the ’cool space’ factor which has created a much more appealing and dynamic submarket that now closely resembles that of contemporary high-performing West Los Angeles.”

-Alison Stateman

San Gabriel Valley Office Asset Trades for $1,000/sf

RENTV

 

Sukut Investments, a private, high net-worth investor, paid $10.85 mil for a 10.6k sf ($1,024/sf), Class A office property in the San Gabriel Valley. The property, located at 4000 Arden Drive in El Monte, is 100% leased to the State of California DMV. 

Mark Shaffer, Gary Stache, Anthony DeLorenzo and Doug Mack of CBRE’s Investment Properties-Southern California team represented the seller, Xebec, in the transaction. 

“We generated competing bids at this pricing level, and continue to see extremely strong demand from private investors and 1031-exchange buyers who are paying a premium for secure income streams,” said Shaffer. 

Added Stache, “This was an extremely rare opportunity to purchase a property with a stable cash flow and a high probability of long-term tenancy in a mission-critical facility.” 

The year started with strong office activity in every Greater Los Angeles submarket. The area’s positive net absorption marked 24 quarters of gains out of the past 29, according to first-quarter research by CBRE. Within the region, the San Gabriel Valley represents a sizeable economic region with a population of roughly 1.52 million people, approximately 15% of Los Angeles County’s population and 14.8% of its labor force. 

Portland's Centrl Office to Set-Up Co-Working Space in LA's Little Tokyo

RENTV

 

Portland-based Centrl Office, a provider of collaborative co-working office space, has agreed to a 10-year lease for 29k sf in Little Tokyo’s Brunswig Square in downtown Los Angeles.The lease value was not disclosed. 

Located at the intersection of Second Street and Central Ave, the building began life in 1931 as a five-story drug company warehouse. Over the years, it was renovated several times, eventually growing to eight stories with floor-to-ceiling windows, high and open ceilings, unobstructed views of the city, and 33k sf of street-level retail shops and restaurants. It also includes onsite parking, with another 10 public parking structures within a two block radius. 

Owned and renovated by Jamestown Development Company, the building also is within two blocks of the increasingly popular Downtown Arts District featuring upscale entertainment venues, hotels, and restaurants, and is just one-half mile from the city’s traditional historic core. 

“As the trend in this type of office use continues to grow exponentially throughout the U.S., one of the markets untapped by Centrl Office was Los Angeles,” said L.A.-based Colliers Executive Vice President Nico Vilgiate who, along with Dallas-based colleagues Executive Vice President Tom Sutherland and Senior Associate Ryan Hoopes, led the brokerage team representing the Portland-based company. CBRE’s Chris Penrose represented the building owner. 

Centrl describes its co-working spaces as “a hotel with no beds. A house without the barking dog. A pub without the drunks. A coffee shop with meeting rooms.” Further, it cites as its primary amenities on-site concierges, high-performance wi-fi, full-service kitchens, large and small meeting spaces, and flexible workspaces close to public transportation. 

“Since almost 2 million people (according to Forbes Magazine) have now worked in some sort of co-working environment at one time or another worldwide, we predict this will be a growing source of office tenancy well into this century,” added Vilgiate. “This has become more apparent as time goes on, especially as major corporations continue to become more and more task oriented, loosening not just their suit-and-tie dress policies, but also their policies on where and how employees, free lancers, and independent contractors they use can work, as long they get the work done.” 

Daily Brief April 30, 2018 unsubscribe

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