The Real Deal Los Angeles

Vectra Buys Hermosa Beach Office for $14.3M

Few office properties exist in small surf city

January 20, 2016 12:59PM
By Hannah Miet

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Hermosa Beach 2200 PCH

The office at 2200 Pacific Coast Highway in Hermosa Beach

There isn’t a lot of office space in Hermosa Beach, the smallest and most laid back of the South Bay’s Beach Cities, so when one hits the market, buyers flock.

Vectra Management Group recently shelled out $14.3 million in an all-cash sale for one of only a handful of office buildings in the 1.4-square-mile surf city.

Vectra, a New York development, investment and management firm with an office in Santa Monica, purchased the three-story 35,898-square-foot building at 2200 Pacific Coast Highway in a 1031 tax exchange transaction from the seller, a syndicate led by San Francisco’s Urban Green investors.

It paid $398 a square foot for the property, more than the $310 a square foot Vancouver’s Onni Group paid in Aug. 2015 for the Manhattan Towers office complex at 230-40 Rosecrans Avenue in neighboring (and known-to-be classier) Manhattan Beach.

The PCH property was renovated a year ago and is 90 percent occupied by 36 tenants who take small spaces that range from 300 to 3,000 square feet, said Geoff Ludwig of Colliers international’s El Segundo office, who represented the seller along with Eric Lastition. Those tenants include Highland Partners, Equitaf investments and many health and fitness firms that fit Hermosa’s protein-shake-and-volleyball vibes.

After the sellers acquired the property in 2013, they added a new exterior façade and renovated the common areas.

Vectra has no plans to renovate the property further, and will hold onto it and lease it as is, said Bryan Barnes, the director of Vectra’s Santa Monica office.

“We like the affluent community that Hermosa represents,” Barnes said.  “It’s on PCH, and I live in the area so I was aware it’s an (attractive) location. For us, it was a simple transaction that should produce stable cash flow.”

Hermosa is surrounded by Manhattan Beach to the north and the larger more urban Redondo Beach to the south. While it is also a well-to-do community, Hermosa Beach has a younger population, a greater proportion of renters, a smaller proportion of family households, and the smallest employment base of the three Beach Cities. It is known for its laid-back beach lifestyle and vacation-oriented nightlife scene more than it is its office properties.

In the fourth quarter, the combined Beach Cities and El Segundo office submarket saw 14.6 percent vacancy with Class A office rents at $2.94 a square foot a month, according to a report from Newmark Grubb Knight Frank. Hermosa skews higher than that average, as do most properties on the PCH. The asking rent at 2200 Pacific Coast Highway is $3.25 a square foot a month, according to LoopNet.