When Los Angeles office reports begin to roll in, we often ask the same question upon review: why is Downtown Los Angeles still lagging behind the market? It is a complicated questions, and experts agree that, while the numbers show low absorption, the market is on its way up. When we interviewed Steve Kolsky, EVP and managing director of the Los Angeles West office at Newmark Knight Frank, about the firm's fourth quarter office report, he suggested that price may be one issue obstructing growth in the market.

Downtown Los Angeles doesn't have the creative stock that tenants are looking for and finding on the Westside and in Hollywood—the leading office markets in Los Angeles. However, the Arts District does have the creative spaces that are in demand. The problem? Price. “The Arts District is priced the same as the Westside, so people aren't going there for low cost options,” Kolsky tells GlobeSt.com. “It doesn't have that benefit to help drive the market. People who go there are finding a unique environment with culture and amenities for their employees. For that reason, it is doing fairly well, but it isn't enough to drive the whole market. It is just a matter of time.”

Typically emerging markets begin as lower cost but adjacent alternatives to high-demand markets. This was true for Playa Vista, El Segundo and Hollywood, which are now all commanding top dollar. “Hollywood is now as expensive as the Westside, just like Playa Vista is as expensive as Santa Monica,” says Kolsky. “They aren't really low cost options. People want to be there for other reasons. People that are motivated to find low cost options are going to look elsewhere.”

Still, Kolsky says that the Downtown market is on its way up. Today, it is hitting the radar for a lot of companies searching for space, even if they aren't moving in quite yet. “It is starting to fill in, and overtime, you will see it as a place where more companies will be going,” says Kolsky. “Today, it isn't a lead driver on most creative companies when they are looking to see where they want to go. Companies are checking the box, but they aren't driven there.”

Instant Insights /

Arts District, Not a Low Cost Option

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