LAX Office Property Values Climb

LOS ANGELES—Decron Properties has sold Airport Spectrum, a 500,000-square-foot office property in the LAX submarket, to Sunny Hills Management Co., for $61.25 million. The sale is the largest in the LAX submarket in more than a decade, and illustrates the escalating office demand and pricing in that area.

“The investment thesis for the deal had a lot to do with the tremendous transformation of the lower Westside, with Playa Vista being one of the hottest office markets in L.A. Because of Playa Vista, demand is moving south. So, for example, El Segundo now has seen a tremendous influx of tenants, many in the creative and technology aerospace industries,” Marc Renard, vice chairman and executive managing director of Cushman & Wakefield, tells GlobeSt.com. “As a result, you are beginning to see Century Blvd. begin to increase in appeal as a lower cost alternative, yet it is right in the proximity of the lower Westside. The $8 billion modernization of LAX an the planned opening of the metro rail station a block away from this property in 2019 led the seller to make the decision that it is a good time to monetize their interest in an asset that they have owned for 15 years.” Renard represented the seller in the transaction, along with his Cushman & Wakefield colleagues Manfred Schaub and Chris Sinfield. David Nagel, CEO and president of Decron Properties, did not respond to a request for comment.

Decron had invested $6 million into the property over the past 10 years, elevating it to class-A status. The two-building property has a new façade, a modernized lobby and common areas and 1,600 parking spaces. The property was 70% occupied at the time of the sale to a tenant mix that includes UCLA, Expeditors International and the Transportation and Safety Administration. “Decron has done a great job of elevating the overall quality of the building, and as the surrounding market improves and lifts, the property is well positioned to increase its occupancy at higher rents,” adds Renard.

As a result of the improving area fundamentals and the quality of the building, the property received significant interest from potential buyers with 16 offers from opportunistic funds, wealthy individuals and off shore investors. “The buyer distinguished themselves with the knowledge of the asset, their level of due diligence and they demonstrated the availability of capital to do the deal quickly,” says Renard.

As a result of the southward movement, office property conversions are also attracting a lot of attention. AEW North America recently bought a $52 million property that it plans to convert into a creative office campus.