LOS ANGELES—After building a significant creative office portfolio in Los Angeles over the past two years, HQ Group has formed HQ Creative Space. The newly launched group will oversee management, development and acquisitions for the firm’s high-end, creative office portfolio.
“I am very bullish on the creative office leasing market in Los Angeles. There are a lot of emerging technology companies in Los Angeles that we haven’t heard of yet, and they will need presence both here and in New York,” Robert Herscu, president and CEO of HQ Group, tells GlobeSt.com. Herscu launched the development company two years ago to focus on developing high-end creative office properties in Los Angeles.
HQ Group’s portfolio consists of 8 buildings, totaling 120,000 square feet, with two more buildings that will come online by the end of the year. The portfolio is located throughout the city, focusing in the major creative hubs, Hollywood, West Hollywood and Culver City. WPP, Vertigo Films, Lin Pictures and Scopely are among the tenants in HQ Group’s creative office properties.
The developer fills a very high-end niche in the creative office market, focusing on smaller, more tailored spaces. Although Herscu didn’t want to discuss specifics about his development model or business plan, he did say that the company spends about $300 per square foot on its property acquisitions. “If you go very high end, you can create huge value,” he explains. “We are very successful in our model, and even though we buy buildings to redevelop speculatively, we are preleasing these properties for record rents in the areas that we are going into. We concentrate on single-tenant, triple-net leases.”
Demand for creative office space is only growing in the Los Angeles market. This demand is mainly driven by the growth of technology and other media companies. A recent report from CBRE shows that creative office rents are rising. Los Angeles, according to the study, was ranked ninth nationally in office rent growth, generating and average $32 per square foot annually and as much as $56 per square foot annually for more popular and tech-friendly submarkets, like Santa Monica.