Why Office Investors Are Going Downtown Now

Downtown Los Angeles is becoming a target market for creative office developers. The market—which has been undergoing a revolution for the last decade—has attracted multifamily, hotel and retail projects. Now, the creative office sector is beginning to grow. ESI Ventures is responding with the purchase of a three properties in the Fashion District, which it plans to redevelop into creative office space. The property totals 194,000 square feet, and will becoming a campus environment with ground floor retail and restaurant options.

“Downtown L.A. is one of the last core downtown markets in a gateway city that actually has development opportunities,” Brandon Wolsic, EVP of ESI Ventures, tells GlobeSt.com. “The Downtown L.A. creative office market offers tenants a cost effective alternative to the Westside, where rents are exceeding $5.00 per square foot, triple net.  In terms of location, our three properties are surrounded by boutique shopping, upscale restaurants and a walking path to the cultural entertainment along Downtown’s historic Broadway District and LA live. Additionally, they are situated directly in the up-and-coming Fashion District within the urban core. Uniquely, apparel wholesale is an industry driver in Downtown L.A. and continues to attract fashion designers and apparel imports to the area.”

ESI purchased two of the assets, 755 S. Los Angeles St. and 700 S. Main St., in a partnership with Urban Offerings, and purchased 732 S. Main Street in a separate transaction. The sale price for the three is not disclosed. ESI will renovate the properties under the adaptive reuse ordinance. The property at Los Angeles St. will have a ground floor food hall, a rooftop restaurant and four floors of creative office space with 11-foot ceilings. The renovations at 700 Main Street include the creation of 100,000 square feet of creative office space with 14-foot ceilings, along with 18,000 square feet of retail space on the ground floor. “These three properties allowed us to purchase assets at a good basis in a portion of Downtown that is experiencing high levels of growth,” says Wolsic. “These deals also gave us the opportunity to revitalize historic buildings in an area that’s gentrifying. We have seen significant growth in the core and fashion districts of Downtown L.A. Our plan is to activate this block of Downtown L.A. We want all three assets to work together synergistically to create a vibrant creative office campus.” 732 Main St. is a vacant land parcel that will be used for parking.

The office market in general has struggled in Downtown Los Angeles, with vacancy rates that have consistently trended above the market average. The availability of space has been a deterrent for some office investors and developers, but Wolsic says the market is demanding creative office space, while most of the supply is traditional office space. “Since creative office is a different product than traditional office, we plan to produce an offering that is unique and fits a growing demand within the market for high quality, historic open space that tenants can adapt to their needs,” he says.

The project is already under construction, and is scheduled for delivery in the fourth quarter of 2019.