The Century City office market has shrinking vacancy rates and rapidly rising rents, thanks to overflow demand from surrounding markets. The class-A high-rise market has been able to attract a mix of both traditional and creative tenants, and has seen rental rate increases upwards of 20% as a result. Century City, however, wasn't always a thriving office market. It was the beneficiary of rising demand in the Santa Monica and Beverly Hills markets and a dearth of quality office supply.

“In Century City, a rising tide has lifted all boats,” Steve Bay, vice chairman at CBRE, tells GlobeSt.com. “Two years, ago Century City was a very different place. Santa Monica and Beverly Hills lifted that market. Century City is the Downtown of the Westside. When Santa Monica rents spiked and space availability become very limited, Century City really took advantage of that. It did a great deal of leasing and attracted a lot of interest from creative tenants.”

In addition to capturing the soaring demand from surrounding submarkets, Century City also saw growth of the law firms in its existing tenant base. As the “downtown of the Westside,” as Bay says, Century City became a submarket where law firms wanted to expand. “I think a byproduct of that in Century City is that you see a number of law firms that have expanded,” he explains. “National and regional law firms have elected to have two offices. We have seen firms expand into the Century City markets; that is part of the growth that we are seeing.”

Comparatively, Downtown Los Angeles has not yet been able to capture the tenant demand that Century City has with the same category of high-rise office stock. “Downtown has to find a way to create new demand. Since I have been there, that has been a struggle,” says Bay. “We are watching to wait and see if creative tenants will find traditional downtown high-rises acceptable locations. That hasn't happened a lot yet.”

Looking ahead at the performance of the office market in 2018 and 2019, Bay expects continued momentum of leasing activity as tenants prepare for rising rental rates. “You want to get deals done if you believe that rents are going to be rising. For the last seven or eight years in a row, rents have gone up,” Bay says. “I don't see the economy slowing down. All of the signs are positive. We don't see interest rates changing. We see a lot of reasons why there will continue to be this status quo, and that is positive for firms looking to make decisions ahead. I see 2018 and 2019 being similar.”

Instant Insights /

Century City, the Unlikely Beneficiary of Santa Monica Overflow

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