What Made El Segundo Ripe for Redevelopment?

LOS ANGELES—Five years ago, El Segundo wasn't on the map. Today, it is a hotbed of creative office development and redevelopment, and it has a diverse supply of creative and traditional office product. While it was once sought out as an affordable alternative to the Westside, it has developed its own presence in the greater Los Angeles market. To find out more about how far El Segundo has come, what the market is like today, and where it is headed, we sat down with Eric Lastition, an executive managing director at NGKF, for an exclusive interview.

GlobeSt.com: What is driving all of the creative office activity in El Segundo

Eric Lastition: Initially, the lack of creative space inventory on the Westside, specifically Venice, Playa Vista and Culver City, was the driving force behind developers repositioning buildings into creative space. Subsequently, the success of those initial projects has spawned the level of activity we see today. What also didn't hurt El Segundo, was that many business owners live in the South Bay and enjoyed having cool, creative opportunities close to home. In El Segundo, they can be closer to home, but still have the same kind of product that they had on the Westside. That continues to be appealing to many companies considering relocation.

GlobeSt.com: Why was El Segundo Ripe for redevelopment?

Lastition: The abundance of buildings needing to be repositioned, coupled with better land and building values, made El Segundo the next logical step for developers seeking new opportunities. The available land led to the small buildings for sale development like the Edge and elevon, while older aerospace buildings were seen as creative conversion opportunities. There was a little bit of everything in El Segundo that was appealing for development. El Segundo's favorable business taxes and being adjacent to LAX Airport, were also big plusses.

GlobeSt.com: How has the creative office market in El Segundo evolved?

Lastition: The creative office market originally started out in Smoky Hollow (the small industrial building portion of El Segundo, West of Sepulveda) with the conversion of small industrial buildings into cool, creative office buildings for sale or lease. From there, the small building ground up developments of the Edge, elevon, and Trisonic propelled the next wave of activity. The most recent direction has been the repositioning of older office and industrial buildings like 777 Aviation and Insite. Many other developments, similar to those, are also in the works.

GlobeSt.com: El Segundo has attracted demand because it is a discount to adjacent markets on the Westside. Today, is the market standing on its own as a place where people and tenants want to be?

Lastition: Yes. The fact that demand is greater than the inventory, in most cases, speaks to that. Four years ago, prices per square foot for old industrial buildings in the Smoky Hollow neighborhood were $200 per square foot. Today, those same buildings are selling for $350 per square foot, in most cases. The amenity base in El Segundo has grown dramatically. The Point and Plaza El Segundo offer the kind of shops and restaurants that tenants look for when they relocate. Tenants don't have to settle for inferior space, amenities, or housing for their employees when they come to El Segundo. El Segundo is definitely standing on its own.

GlobeSt.com: El Segundo and creative office have become synonymous. Have you seen more activity in other asset classes as well?

Lastition: El Segundo is unique in that it offers a variety of types of space available. Although creative space is all the rage these days, traditional office space is also available at several projects. Some buildings even offer the choice between the two, creative and traditional. In addition, there has been tremendous activity in the hospitality and retail sectors as well. One only needs to drive down Sepulveda in order to see several new hotels and several new redevelopments.

GlobeSt.com: What is your long-term forecast for the El Segundo market?

Lastition: El Segundo has always been one of the strongest submarkets in the South Bay overall.  It has always enjoyed some of the lowest vacancy rates, as well as the highest absorption rate. El Segundo will continue to be a leader in the direction of the South Bay. It is an exciting time to be in the El Segundo market.

LOS ANGELES—Five years ago, El Segundo wasn't on the map. Today, it is a hotbed of creative office development and redevelopment, and it has a diverse supply of creative and traditional office product. While it was once sought out as an affordable alternative to the Westside, it has developed its own presence in the greater Los Angeles market. To find out more about how far El Segundo has come, what the market is like today, and where it is headed, we sat down with Eric Lastition, an executive managing director at NGKF, for an exclusive interview.

GlobeSt.com: What is driving all of the creative office activity in El Segundo

Eric Lastition: Initially, the lack of creative space inventory on the Westside, specifically Venice, Playa Vista and Culver City, was the driving force behind developers repositioning buildings into creative space. Subsequently, the success of those initial projects has spawned the level of activity we see today. What also didn't hurt El Segundo, was that many business owners live in the South Bay and enjoyed having cool, creative opportunities close to home. In El Segundo, they can be closer to home, but still have the same kind of product that they had on the Westside. That continues to be appealing to many companies considering relocation.

GlobeSt.com: Why was El Segundo Ripe for redevelopment?

Lastition: The abundance of buildings needing to be repositioned, coupled with better land and building values, made El Segundo the next logical step for developers seeking new opportunities. The available land led to the small buildings for sale development like the Edge and elevon, while older aerospace buildings were seen as creative conversion opportunities. There was a little bit of everything in El Segundo that was appealing for development. El Segundo's favorable business taxes and being adjacent to LAX Airport, were also big plusses.

GlobeSt.com: How has the creative office market in El Segundo evolved?

Lastition: The creative office market originally started out in Smoky Hollow (the small industrial building portion of El Segundo, West of Sepulveda) with the conversion of small industrial buildings into cool, creative office buildings for sale or lease. From there, the small building ground up developments of the Edge, elevon, and Trisonic propelled the next wave of activity. The most recent direction has been the repositioning of older office and industrial buildings like 777 Aviation and Insite. Many other developments, similar to those, are also in the works.

GlobeSt.com: El Segundo has attracted demand because it is a discount to adjacent markets on the Westside. Today, is the market standing on its own as a place where people and tenants want to be?

Lastition: Yes. The fact that demand is greater than the inventory, in most cases, speaks to that. Four years ago, prices per square foot for old industrial buildings in the Smoky Hollow neighborhood were $200 per square foot. Today, those same buildings are selling for $350 per square foot, in most cases. The amenity base in El Segundo has grown dramatically. The Point and Plaza El Segundo offer the kind of shops and restaurants that tenants look for when they relocate. Tenants don't have to settle for inferior space, amenities, or housing for their employees when they come to El Segundo. El Segundo is definitely standing on its own.

GlobeSt.com: El Segundo and creative office have become synonymous. Have you seen more activity in other asset classes as well?

Lastition: El Segundo is unique in that it offers a variety of types of space available. Although creative space is all the rage these days, traditional office space is also available at several projects. Some buildings even offer the choice between the two, creative and traditional. In addition, there has been tremendous activity in the hospitality and retail sectors as well. One only needs to drive down Sepulveda in order to see several new hotels and several new redevelopments.

GlobeSt.com: What is your long-term forecast for the El Segundo market?

Lastition: El Segundo has always been one of the strongest submarkets in the South Bay overall.  It has always enjoyed some of the lowest vacancy rates, as well as the highest absorption rate. El Segundo will continue to be a leader in the direction of the South Bay. It is an exciting time to be in the El Segundo market.