Market Shift Will Create Opportunities for Tech Companies in 2009
With the down-turn of the local
and national economy, there has been a shift in the Los Angeles commercial
real estate market. More attractive officing opportunities for technology
companies are pouring into the market. Early to mid staged companies
can now expect lower occupancy costs, more lease flexibility and better
locations leading to better talent recruitment.
Los Angeles based technology companies tend to locate in West Los Angeles,
the Conejo Valley and along the 210 corridor office markets.
vacancy rates in West Los Angeles submarkets such as Century City and
Westwood remain somewhat stable, a different story has been brewing
in submarkets such as Santa Monica, Culver City, El Segundo and Marina
Del Rey over the past 12 months, with vacancy rates climbing in these
could argue that the Conejo Valley is further depressed than the West
Los Angeles submarkets, specifically resulting from the struggles and
layoffs of Conejo Valley based Countrywide Home Loans and Amgen, two
of the largest employers in greater Los Angeles.
The 210 freeway corridor market
and the Pasadena submarket have been impacted by the collapse of two
of its largest office users, Indy Mac and Fannie Mae, causing vacancy
rates to increase in this market as well.
One would think that increasing
vacancies would lead to decreasing rents, right? Well, not
yet. Come 2009, rents will follow their historical inverse relationship
to vacancies leading to many opportunities for young and thriving technology
You may ask; other than lower
rents, how else can my company benefit from a regressing real estate
market? Here are the top 5 ways a technology company can benefit from
the current market:
5. Renegotiate your existing
toxic lease terms: This market will present an opportunity
for companies to renegotiate current lease terms including personal
guarantees, high security deposits, and above market rents even with
long term remaining on the lease.
4. Little or no lease securitization:
Since sublandlords are looking to stop the bleeding and direct landlords
are starting to become nervous about increasing vacancy rates, young
companies will be able to secure office space without the demanding
personal guarantees, security deposits, or letters of credit.
3. Increased flexibility
without the rent premium attached:
Short lease terms along with options to expand or contract typically
have led to higher rents and therefore have been almost unattainable
in our recent market. With vacancies increasing landlords will be more
open to flexible lease terms without charging a significant rent premium.
ready office space at discounted rent: With a surge of subleases
entering the market in pristine condition, lean technology companies
can find “cool and creative” space without the high capital requirements
typically required for a build out or furniture.
1. Better locations at better
rents: Top tier markets that had priced out early to mid staged
technology companies will now once again be considered as part of the
consideration set. This should lead to better recruitment since the
company with the better location and better working atmosphere is most
often times the winner in the battle for talented and experienced employees.
Jacob Bobek (Jacob.firstname.lastname@example.org)
is associate director and Scott Steuber (email@example.com)
is an associate at Cushman & Wakefield in Los Angeles. Cushman
& Wakefield, the world’s largest privately held real estate services
firm, delivers integrated solutions by actively advising and implementing
on behalf tenants through every stage of the real estate process