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Speculative Industrial Conversions Expand in Media Hub - More Offices Open, Spurred by Mass Transit and Apartments

September 20, 2019

A developer has transformed a warehouse near Culver City, California, into offices. (Oldhickory49)

 

A private real estate investment firm has converted an old industrial building into creative office space without a tenant in tow, in a sign of expanding speculative building to tap booming demand around Culver City, California, where major tech and media companies including Amazon, Apple and HBO are quickly growing.

Bow West Capital, based in downtown Los Angeles, said it has completed the redevelopment of a former warehouse at 3309-3323 La Cienega Place , into seven, two-story office suites in one building. The 25,240 square-foot property sits in Los Angeles next to Culver City's popular Hayden Tract area, where lots of industrial properties have recently been converted to office.

Bow West Capital, which specializes in repurposing underutilized real estate, has not signed a tenant yet but was attracted to the booming area given the popularity of the neighborhood, which includes creative office campus Blackwelder and an under-construction development known as Cumulus that is expected to be the largest apartment complex built in Los Angeles in decades. It is walking distance from a stop on the Metro Expo Line light rail that takes riders from Santa Monica to downtown Los Angeles.

"For tenants, the location makes it easy to attract talent from downtown, the Westside and the South Bay," Sean Beddoe, founder and president at Bow West Capital, said in an email.

 

Culver City leasing momentum has picked up in the past year, with companies leasing up new developments before they even finish construction. P remium cable channel HBO announced plans to relocate its headquarters to a 240,000-square-foot office building at Ivy Station, a sprawling apartment-retail-office project underway near another stop on the Metro Expo Line.

 

The city has also attracted the entertainment division of tech giant Amazon, which has signed leases for more than 500,000 square feet at Culver Studios, a production lot being redeveloped by owner and developer Hackman Capital. Meanwhile iPhone maker Apple leased a 128,000-square-foot, under construction project at 8777 Washington Blvd. from developer Lincoln Property Co.

 

The activity has pushed the Culver City’s office vacancy rate down 3.5 percentage points in the past 12 months to roughly 9.6%, even as it boasts one of the most active office development pipelines in the region, according to CoStar.

 

“As Culver City gets more built out, people are moving east,” Ryan Patap, director of market analytics at the CoStar Group, said. “Its proximity to the Blackwelder project, which has been pretty successful, shows that the location is highly attractive to tenants.”

 

An Early Conversion

 

Blackwelder is a more than 157,000-square-foot office complex that was one of the first major conversions of an industrial site to creative offices in the area beginning around a decade ago. Today, it is home to more than a handful of creative businesses, including media company Bandito Films and visual effects house The Mill.

 

A majority of offices in this area are industrial conversions and new creative office that have been highly attractive to the creative companies that drive office demand in greater Los Angeles, according to CoStar.

 

Bow West development's office suites, which range in size from 3,000 square feet to more than 6,000 square feet, have private second-floor patios, glass roll-up doors that provide an indoor-outdoor environment, lofted glass conference rooms and open kitchens.

 

Architect Thomas J. Rule designed the project, which includes the addition of a 12,000-square-foot mezzanine level in the building. The property also features a 300-foot-long, 30-foot-high mural by artist Robert Harkness Studioson its back wall.

 

Bow West Capital purchased the original 17,000-square-foot warehouse at the site two years ago for $11.75 million, or $465.53 a square foot, according to CoStar data. Local construction company GHBW managed construction of the redevelopment project, which began in October last year.

 

The company has not disclosed asking rates at the project but market office rents in Culver City are about $4 a square foot a month, according to CoStar Market Analytics . However, prime spaces in downtown Culver City and around the Hayden Tract can get rates above $5 a square foot or as high as $6 a square foot.

 

The area is expected to draw in even more interest when developer Carmel Partners completes its residential-retail Cumulus project, at 3321 La Cienega Blvd., that is expected to be the largest apartment complex built in Los Angeles since Park La Brea in the Fairfax District. The 1,210-units project is designed to include a seven-story podium building and a 30-story high rise plus 100,000 square feet of retail, according to its website. Online retailer Amazon-owned Whole Foods also recently signed a lease for about 50,000 square feet at the site.

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