Has Long Beach Been Overlooked?

LOS ANGELES—Downtown Long Beach has all of the makings of a live-work-play environment: public transit, apartment complexes, great retail—and it is on the waterfront. Office investors are starting to take note of the changing dynamics in the Long Beach market. These were the characteristics that attracted the Ruth Group to purchase a 105,000-square-foot, six-story office building in Downtown Long Beach, which they plan to convert into a creative office property.

"We are excited about the opportunity in Long Beach because of the amount of space that is being converted from office to residential," Bob Ruth, president of the Ruth Group, tells GlobeSt.com. "There is about 800,000 square feet there with limited supply coming online in Long Beach. This property has a great location next to a promenade with large balconies on every floor, a large plaza in front of the building that allows us to create a collaborative and environmentally sensitive project to attract creative office tenants. The location amenities with the transportation, restaurants, hotels and incredible bike access afford us the luxury to create a very unique and very collaborative work environment."

The firm has been looking to break into the Downtown Long Beach market during this cycle because of the new capital flooding in and revitalizing the market. Although the market hasn't seen the rebound that other Southern California markets have, Ruth notes that its waterfront location makes the market inherently valuable. "The rents in Long Beach are well below the average rents in Southern California, so when you look at cities that are on the water with excellent transportation, hotels, restaurants and residential coming back online, it creates the opportunity to live, work and play in an urban environment on the water," adds Ruth. "There are very few alternatives in Southern California that give you that kind of luxury. We are very excited about the renaissance that is taking place in Downtown Long Beach."

The Ruth Group purchased the property for $17 million from Jamison Services and will put an additional $6 million into the property to reposition it as a creative office property. The property is currently 93% leased; however, creative office tenants lease only 45% of the property, and Ruth would like to see that number go up, especially because Long Beach is a great alternative to the rising prices in El Segundo and the South Bay markets. "When you take a step back and you look for properties on the water with urban amenities, it is very difficult to find an alternative with these kinds of rents," he says.

While the conversion will enable them to push rents up, he says that the rents will still be at a discount to the great Los Angeles market. The Long Beach market, though, has a pretty broad range of rents because of the diversity of the product. "Long Beach is an interesting market because you have three high-rise class A buildings, and then you have a series of building that are in the class-A market but are scattered throughout the landscape in Downtown Long Beach, so the rents are within a range, but they are still cheaper than the alternatives, like West L.A., El Segundo and Orange County," explains Ruth.

CBRE's Kevin Shannon, Ken White and Michael Moore represented both the buyer and the seller in the transaction.