Downtown Los Angeles may still be in the early stages of its renaissance, but its office market is already falling behind — at least compared to Century City.
The once-struggling Westside office market saw its vacancy drop more than 5 percent between 2016 and 2017, from 14 percent to 9 percent. DTLA’s barely budged, moving from 16.4 to 16.3 percent, according to second quarter data from JLL.
The recent growth in Century City can be attributed largely to the growth of entertainment and tech sectors in the surrounding West L.A. region, experts told The Real Deal. As those industries grow, the professional services that serve them grow as well — and it helps to be a neighbor.
Century City and DTLA are both practically synonymous with professional services. Century’s niche, however, is the particular services that cater to the entertainment industry, like talent representation and entertainment litigation. DTLA — while close to Hollywood proper — is far from the tech-meets-media expansion happening in Silicon Beach.
“Whether it’s Google in Playa Vista or Snapchat in the Santa Monica Business Park or Sony in Culver City, the Century City submarket is seeing the spillover effects” said Brian Niehaus of JLL. “Things would be very different if Google went Downtown.”
Because they have long been entertainment-oriented, Century City law firms are defying the trend toward downsizing as firms consolidate nationwide, said Michael Soto, research manager at Transwestern.
The 35-story tower at 10240 Constellation Boulevard, for example, had two tenants recently sign expansion lease: Lakim & Watkins, an entertainment law firm, and ICM Partners, an entertainment consulting group.
“2016 was a year of interesting relocations and organic expansions in Century City,” JLL director of research Amber Schiada said in a recent JLL report that compared the buildings that make up the skyline in Century City to those in DTLA. “Looking ahead, it seems like the massive wave of in-migration and expansions are over for now but tenants continue to eye Century City.”
The size of the markets also matters. Downtown has about 30 million square feet of office space, whereas Century City — often dubbed the Downtown of the Westside — only has 10 million square feet.
“When you have more square footage, you have more challenges,” Soto said.
This doesn’t mean, necessarily, that Downtown property owners should panic. While Century City skyscraper rents have now hit a record high of almost $5 a month, Downtown’s skyscrapers offer a discount at $3.33, according to the JLL data. It’s an alternative that many firms may need.
“Downtown has sold itself as the lower-cost alt to the Westside, and there are a lot of diamonds in the market,” Soto said. “DTLA in the long term will be healthy, [and a] much more diverse tenant base.”