Brookfield Properties is having a pretty good year with leasing velocity in its Downtown Los Angeles office portfolio. The firm expects to close the first quarter with 200,000 square feet in leasing activity in the market, including a 58,000-square-foot lease at Figueroa at Wilshire with Seyfarth Shaw LLP. This is all in an office market that continues to garner a 17%-plus vacancy rate, among the highest in Los Angeles. To get an inside look at the firm's leasing strategy and if it is concerned about the vacancy, we sat down with John Barganski, SVP of leasing at Brookfield Properties, for an exclusive interview.

GlobeSt.com: What has driven leasing activity in your portfolio for the last six months?

John Barganski: We have made some significant capital investments in the properties in the common areas and amenities that seem to resonate with people. That is compounded by the confidence in the traditional and new tenants coming to the market. They want to make commitments, and deals are happening faster. People have missed out on opportunities where traditionally they would have taken longer to study different opportunities downtown, and they have realized that they are going away. That has motivated people to move a little quicker and take advantage of the deals that are available.

GlobeSt.com: Have you seen a change in your tenant base recently?

Barganski: We have seen an abundance of people in the quote-unquote creative fields. I put the engineering and design companies in that category, and they have been a driver generally for Downtown Los Angeles. They are focused on amenities and they are focused on trying to implement new build-out strategies. Typically, downtown tenants sign long-term leases, and they spend a lot of capital trying to build spaces out. Everyone is intrigued with building their space more efficiently and more attractively to the employees I am looking to hire.

GlobeSt.com: Downtown Los Angeles has the highest vacancy rate in the Los Angeles office market, and it hasn't seemed to wane. Is the vacancy rate a concern, or a metric that you are following?

Barganski: We are the largest class-A landlord in Downtown Los Angeles, so we are always concerned about the macro trends. We have seen reports from brokerage shops that can quantify anywhere from 3.5 to 4 million square feet of new-to-downtown Los Angeles tenancies that have occurred in the last four years. Yet, the vacancy winds up pretty constant. I would opine that companies doing work more efficiently has offset the new tenants. It has been a push-pull in certain represents. We think that the general sense is that the existing tenant base is well into if not almost completely done with the shredding of space as part of their new workplace strategies. If we keep a continuation of the demand side of new tenants coming to downtown, we think that the vacancy rate is going to come down precipitously in the near future.

GlobeSt.com: What are your leasing expectations for your Downtown Los Angeles portfolio this year?

Barganski: Over the last five years, we have averaged a million square feet of leasing velocity in our Downtown portfolio. We expect to be somewhere in that range this year, and we are disproportionately looking for new leasing activity to drive occupancy in our assets. We have a couple of major leases rolling over, which will lower our occupancy, but with the demand that we already have, we think that we will be able to make up the ground for those vacancies that are coming our way later this year. Last year, we did a little more than a million square feet of leasing activity in Downtown Los Angeles with the majority of it in the fourth quarter. This year, we are going to book north of 200,000 square feet in 1Q18 alone, and we have a good backlog of other leasing to accomplish as well.

GlobeSt.com: You are obviously big believers in the Downtown market. What is your outlook for the office market this year?

Barganski: We are bullish on the market. So much of the exciting change that has happened with the residential base is happening this year. A lot of it has been talked about, the 2018 is a really big year for delivery. I think that people have been responsive to the story, but now they are going to get to experience it, and we think that is going to drive demand. People are also confident in the economy. We see people expanding and making quicker decisions, and that makes us feel good about 2018.

Instant Insights /

Inside Brookfield's DTLA Leasing Strategy

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