LOS ANGELES—There is an office revolution coming to the Arts District. While multifamily developers have been finding success there for the last few years, office developers, like Olive Hill Group, are just now starting to enter the market. Olive Hill Group is in negotiations on several warehouse spaces, and says that it is bullish on the market for 2017. In addition to development opportunities, Warner Music recently signed a lease that is expected to serve as a catalyst for even more growth. We sat down with Tim Lee, VP of Corporate Development and Legal Affairs at Olive Hill Group, to talk about the growth in the market and why it is on their radar.

GlobeSt.com: We have seen a lot of multifamily development in the Arts District, but it seems that the office market is just taking off. Why are you attracted to the Arts District?

Tim Lee: The benefit of the Arts District is that it is creating it's own community; it's own community of restaurants, cafes and tenants. It is also geography as well. It is part of downtown, but there is some separation there. We have seen that the Art's District is more of a creative area, and with Warner Music putting in their large creative office space, there is going to be more demand from creative-type tenants. For us, there is an opportunity to build out large creative spaces. Prices have gone up in Downtown Los Angeles, and people looking for larger spaces are starting to look in the Arts District. It makes more sense from a cost-per-square-foot view.

GlobeSt.com: So, is the cost savings the chief driver of demand in the Arts District?

Lee: It is not just about the cost-per-square foot. It is also the environment. We have also noticed that creative tenants really prefer to be in low-rise buildings. The Arts District offers a lot of creative low-rise, warehouse-type opportunities. The problem is that Downtown Los Angeles has a lot of high rises, and so there is no access to the outdoors. Being on a high floor isn't important to these types of tenants; it is not a benefit, and they don't see the point of paying for it.

GlobeSt.com: How do rents in the Arts District compare to other popular creative markets.?

Lee: We still see a premium on the Westside and in Downtown. In the Arts District, rental rates are the lowest of all of the markets, but it does depend on the tenant build out, too. The benefit of the Arts District is that there are a lot of raw opportunities for tenants and developers. On the Westside, a lot of the properties are already built out. In the Arts Districts, tenants and developers can convert warehouses into creative spaces and it is relatively inexpensive. It is really ripe for the picking in the next few years as it continues to develop.

GlobeSt.com: The renaissance has focused on creating a live-work-play community. Do you expect that the employees of creative tenants moving into office space will also live in the Arts District?

Lee: People are already looking at the Arts District as an alternative to living downtown, because it is close to downtown but the rents are quite a bit less. Sometimes they are 30% to 40% less. Plus, a lot of the development in the Arts District is new so those tenants aren't sacrificing much in terms of amenities. Then, the increase of creative tenants going in is going to naturally draw the tenants who work in those buildings to live in the Arts District. The Arts District is becoming more and more walkable, and the restaurant scenes are becoming much more vibrant. It is just going to be natural in the next year or two that people are going to want to live near work. It just so happens that in the Arts District, living near work is very affordable.

GlobeSt.com: Why has the Downtown renaissance arrived so late the Arts District?

Lee: I think that part of that is getting a critical mass in housing and gentrification. The renaissance of Downtown Los Angeles and the gentrification of it has taken years, since the construction of LA LIVE and the Staples Center. The renaissance in the Arts District is the bleed-over of that, and it has just taken time for the development to reach the market. Now, we are starting to get to the tipping point and it is becoming a very attractive area.

GlobeSt.com: We have seen a lot of multifamily development in the Arts District, but it seems that the office market is just taking off. Why are you attracted to the Arts District?

GlobeSt.com: So, is the cost savings the chief driver of demand in the Arts District?

GlobeSt.com: How do rents in the Arts District compare to other popular creative markets.?

GlobeSt.com: Why has the Downtown renaissance arrived so late the Arts District?

Instant Insights /

The Arts District's Office Revolution

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