Future Cities

The Arts District — Los Angeles’ Eastern Migration

February 28, 2020 3 Minute Read

By John Zanetos Christopher Penrose Jr


Sign up to receive research, perspectives and ideas from CBRE

The Arts District. A mere 3.5 square miles, this LA neighborhood has arguably seen more lease and sales transactions of office and multifamily per square foot than any other part of Downtown Los Angeles. Today, two major infrastructure projects underway in the neighborhood, comprising more than $2 billion in public investment promise to shift the urban landscape even further, according to our latest report. National precedents in public investment suggest that the completion of the Sixth Street Viaduct and the Regional Connector will further turbocharge growth in this Downtown neighborhood.

Our team has helped to facilitate the leasing of a staggering 730,000 square feet of office space over the past five years. We have used our expertise and strong knowledge of Los Angeles to attract tenants from other markets to the Arts District, particularly those from the more expensive and crowded West Side, including Santa Monica and Culver City as well as from neighborhoods, such as Hollywood and Glendale. One of our earliest and arguably most catalytic transactions was Warner Music’s 275,000 square-foot commitment at the Ford Factory in 2016. Our team at the time represented New York-based developer Shorenstein Properties in the deal.

Since then, we have leased over 411,000 square feet at The Row, filling 135,000 square feet at 4th & Traction and helping to populate 100,000 square feet at 405 Mateo with such well-known tenants as Ghost Ventures, Honey Science as well as co-working firms.

In spite of the Arts District’s relatively small footprint and the already exorbitant amount of square footage leased, tenant activity in the neighborhood remains strong, with more office product coming online in the coming two years to accommodate the increasing demand. Projects on the calendar for completion include Continuum’s 110,000 square-foot office development at 640 Santa Fe Avenue and Lowe’s 113,000 square-foot office building at 2130 Violet. Tenants – such as media, tech, e-sports and production- most from out of market from areas such as Santa Monica, Culver City, Hollywood and the Tri-Cities, are already negotiating for space in these buildings. Our team is also close to signing an additional 100,000 square feet of new companies in the entertainment, technology and media sectors to the market in 2020.

While many tenants and brokers alike have had great reason to focus on the better-established West Side markets as well as those with highly recognizable name such as Hollywood, the Arts District has become a serious contender for some of the region’s and nation’s best-known names. We are already in talks with tech, design and entertainment companies that are eager to get their foot in the door.

We are now seeing the Arts District’s second chapter. Tech, media and entertainment, as well as increased professional services including legal and accounting are all vying for space in the neighborhood. Accenture and Durie Tangrie have both made commitments in the Arts District for over 40,000 square feet – CBRE represented both tenants in the negotiations. This continued growth is also attracting a new crop of investors to the market, including New York-based Atlas and VE Equities and Denver-based Continuum.

More high-credit tenants will consider DTLA and the Arts District as a first or second location to plant their flag, especially as this vibrant area still leases at a discount compared with some other markets. Fourth-quarter average full-service rents were $4.77 per square foot is the Arts District as compared with $5.32 FSG in West LA, according to the latest CBRE research.

While it has a lot to do with the appeal of the Arts District itself, it also is linked directly to the fantastic evolution Downtown has experienced, the immense amount of residential properties that have or are coming online and the large variety of amenities, such as restaurants and other entertainment that has settle into this part of town. Just this week on my way to Bestia, I saw a line a block long waiting to get into clothing store Juice LA. It’s truly incredible what’s happening here.

Tenants will continue to look east because this is where a lot of their employee base lives. Today, it’s less about where the executives reside but where your vast talent base is located. We all have been talking about the West Side forever – for good reason -- but we are seeing an increasing migration east and areas such as the Arts District stand to benefit.