Tishman Speyer bought the property in 2007 at the peak of the real estate market for $83 million. The building was just sold to Highridge Partners, a Los Angeles real estate investor, for $31 million, an astonishing 63% drop in 2 years. The building is 78% leased. [Los Angeles Times]
We are bearish on the Los Angeles office market at present for the following reasons:
- There is already a glut of office properties in such key sub-markets as Santa Monica, Beverly Hills and Downtown Los Angeles. It will take years to absorb the vacant space.
- Existing businesses are downsizing. There have been the greatest round of layoffs in a generation.
- Demand for offices is waning. Increasingly, employees will telecommute and work mobilely. Lighting, heating/cooling, and cleaning spaces that will be occupied by employees for only a few hours a week is inefficient.
- Downsizing of personal space. Sergey Brin and Larry Page at Google share a modest office. Businesses of the future will be mean, lean and leave the egos behind. Offices turn into cubes, cubes turn into common work spaces. Days of the four-walled office are numbered.