J.P. Morgan Asset Management has joined the slew of investors looking to bail out of a spiraling Los Angeles office market. The firm has listed its trophy tech hub in Santa Monica.
The unit of New York-based JPMorgan Chase is looking to find a buyer for its 1.4-million-square-foot Water Garden office campus at 1620 26th Street, the Commercial Observer reported.
Its asking price has not been disclosed.
The 17-acre campus, whose eight six-story office buildings are 84-percent occupied, is home to such tenants as Amazon.com and Sony.
The firm, which acquired the property 21 years ago, declined to comment to the Observer. Eastdil Secured, which is marketing the property, also declined to discuss the sale.
In May, Amazon signed a deal to rent 200,000 square feet of offices at the Water Garden, considered the largest Westside office campus north of Interstate 10. Terms of the lease — the largest office commitment in the county this year — were not disclosed.
The park-like business center, linked by meandering waterways about two miles from the beach, now houses Amazon Studios, software giant Oracle, with 290,000 square feet and Entravision, with 145,000 square feet, according to a brochure.
The additional Amazon offices are expected to open in the middle of next year and house more than 1,000 workers.
The Water Garden, next to Hulu, Roku and HBO offices at the Colorado Center, is in one of the most expensive office markets in Greater L.A. The average asking rent for Class A office space in Santa Monica was $6.32 per square foot per month in the first quarter, compared to the $4.09 county average, according to Newmark.
That rate would peg Amazon’s lease at $15.2 million per year, according to the Observer.
The white buildings checkered with large green-tinted windows include cafes and restaurants, a fitness center, daycare center, childcare, banks and parking for nearly 4,200 cars. JPMorgan completed a $50 million renovation about six years ago.
In September 2020, Spaces sued J.P. Morgan over $5.4 million in tenant improvements.
The property is for sale for the first time since it was completed 30 years ago, and at a tough time for office real estate — facing rising interest rates, climbing vacancy rates during and the specter of remote work.
Tech companies that once led much of L.A.’s office market are pulling back, with Amazon announcing a hiring freeze and Meta, parent company of Facebook, which will spend $3 billion through next year to consolidate its offices worldwide.
In response, major office investors in Los Angeles are heading toward the exits.
More than a quarter of L.A. offices are either vacant, available for sublease or will soon be available, for a record 25.4 percent availability rate, according to third-quarter report by Savills.
Sublease space alone is also near a record-high 10 million square feet, and office rents dropped slightly to $4.06 per square foot per month.
Brookfield, the largest office landlord in Downtown L.A., is looking to sell a 1 million-square-foot tower for $400 million after acquiring it more than 15 years ago, according to the Observer.
Other office landlords have followed suit, including New York Life Insurance, CIM Group, J.H. Snyder Company, Hudson Pacific Properties and Atlas Capital, which have each listed office properties.
“No ownership, big or small, will put additional capital, (tenant improvements), etc., if it doesn’t clearly improve the value,” a market analyst told the Observer. “With REITs like HPP selling below IPO pricing, owners can’t throw away good money.”
“Everyone (office landlords) is now in occupancy preservation mode instead of pushing rental rates,” another source told the news site.
— Dana Bartholomew
Read more
Commercial
Los Angeles
Co-working firm Spaces sues landlord over $5.4M in tenant improvements
Commercial
Los Angeles
LA's 10 biggest office leases of 2016