Looking for Bargains on Office Space? Prepare for Sticker Shock. Rents Are Higher Than Before COVID

Ben Bergman

Ben Bergman is the newsroom's senior finance reporter. Previously he was a senior business reporter and host at KPCC, a senior producer at Gimlet Media, a producer at NPR's Morning Edition, and produced two investigative documentaries for KCET. He has been a frequent on-air contributor to business coverage on NPR and Marketplace and has written for The New York Times and Columbia Journalism Review. Ben was a 2017-2018 Knight-Bagehot Fellow in Economic and Business Journalism at Columbia Business School. In his free time, he enjoys skiing, playing poker, and cheering on The Seattle Seahawks.

Looking for Bargains on Office Space? Prepare for Sticker Shock. Rents Are Higher Than Before COVID

Nearly a year into the worst pandemic in a century, Los Angeles companies expecting to snap up office space on the cheap may be disappointed.

L.A. office rents have held steady or even gotten pricier since COVID, even as more space has become available as most employees continue to work from home.

"I honestly thought rents would have dropped by now," said Michael Soto, research director at the brokerage Savills Inc. "For a lot of tenants, they are still seeing a bit of sticker shock that prices haven't dropped yet."

Despite a 22% vacancy rate, the average asking L.A. office rent at the end of 2020 creeped up to $44.88 a square foot from $42.12 at the end of 2019, according to Savills. In West L.A., where most tech companies are located, rent inched up to $62.96 from $59.58 even as vacancy also increased to 21% from 14%.

"It's counterintuitive," said Soto. "Usually when availability goes up, rent goes down. But rents have been sticky."

Soto credits the steadiness in prices to landlords holding firm on pricing, anticipating that workers will return to the office in the second half of the year.

"We are in a wait-and-see approach to see who blinks first," Soto said.

Even though overall demand for office space in L.A. has fallen, it is still doing much better relative to other major cities, according to the VTS Office Demand Index (VODI), a real time tracker of private commercial real estate data. It found demand in L.A. was down only 15% in January compared to the same month in 2020. By comparison, demand plummeted 52% in San Francisco and 68% in New York.

One reason why is the Netflix effect. Through the pandemic, streaming services continued to aggressively expand their L.A. footprint, which helped drive up rent for the market as a whole.

"These are companies that are flush with capital," Soto said. "They have taken advantage of drop off in leasing activity to expand to get favorable terms."

Some large tech companies – such as Salesforce, Zillow, Twitter and Dropbox – have said remote work will be permanent. But they are still in the minority as most companies plan to return to the office, even if they will not require all their workers to be present all the time.

Just one in 10 companies expect all employees to return to their pre-pandemic work arrangements, according to a recent survey conducted by the National Association for Business Economics. A dot.LA survey of top L.A. VCs conducted in December found 28% do not expect employees to ever go back, but 44% expect employees to return during the second half of this year.

Jamie Montgomery, co-founder and managing partner of March Capital, said he never considered giving up his venture firm's Santa Monica office and that he's hopeful his staff can return in a few months.

"We have a relatively young team and they like the social interaction," Montgomery said. "I think we're in what I would call a creative industry where you kick around ideas and you come up with the best ideas. I mean, I'm not going to sit here at my desk and be a brilliant investor."

Montgomery says he was able to buck the trend of higher rents when he signed a new lease in December, lowering his rent to where it was five years ago. He was eager to get the deal done before prices increased.

"I thought if we waited too long we probably would miss that window," he said.


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Genies Wants To Help Creators Build ‘Avatar Ecosystems’

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

Genies Wants To Help Creators Build ‘Avatar Ecosystems’

When avatar startup Genies raised $150 million in April, the company released an unusual message to the public: “Farewell.”

The Marina del Rey-based unicorn, which makes cartoon-like avatars for celebrities and aims to “build an avatar for every single person on Earth,” didn’t go under. Rather, Genies announced it would stay quiet for a while to focus on building avatar-creation products.

Genies representatives told dot.LA that the firm is now seeking more creators to try its creation tools for 3D avatars, digital fashion items and virtual experiences. On Thursday, the startup launched a three-week program called DIY Collective, which will mentor and financially support up-and-coming creatives.

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Here's What To Expect At LA Tech Week

Christian Hetrick

Christian Hetrick is dot.LA's Entertainment Tech Reporter. He was formerly a business reporter for the Philadelphia Inquirer and reported on New Jersey politics for the Observer and the Press of Atlantic City.

Here's What To Expect At LA Tech Week

LA Tech Week—a weeklong showcase of the region’s growing startup ecosystem—is coming this August.

The seven-day series of events, from Aug. 15 through Aug. 21, is a chance for the Los Angeles startup community to network, share insights and pitch themselves to investors. It comes a year after hundreds of people gathered for a similar event that allowed the L.A. tech community—often in the shadow of Silicon Valley—to flex its muscles.

From fireside chats with prominent founders to a panel on aerospace, here are some highlights from the roughly 30 events happening during LA Tech Week, including one hosted by dot.LA.

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PCH Driven: Director Jason Wise Talks Wine, Documentaries, and His New Indie Streaming Service SOMMTV

Jamie Williams
­Jamie Williams is the host of the “PCH Driven” podcast, a show about Southern California entrepreneurs, innovators and its driven leaders on their road to success. The series celebrates and reveals the wonders of the human spirit and explores the motivations behind what drives us.
Jason Wise holding wine glass
Image courtesy of Jason Wise

Jason Wise may still consider himself a little kid, but the 33-year-old filmmaker is building an IMDB page that rivals colleagues twice his age.

As the director behind SOMM, SOMM2, SOMM3, and the upcoming SOMM4, Wise has made a career producing award-winning documentary films that peer deep into the wine industry in Southern California and around the world.

On this episode of the PCH Driven podcast, he talks about life growing up in Cleveland as a horrible student, filmmaking, Los Angeles and his latest entrepreneurial endeavor: A streaming service called SOMMTV that features–what else?–documentaries about wine.

The conversation covers some serious ground, but the themes of wine and film work to anchor the discussion, and Wise dispenses bits of sage filmmaking advice.

“With a documentary you can just start filming right now,” he says. “That’s how SOMM came about. I got tossed into that world during the frustration of trying to make a different film, and I just started filming it, because no one could stop me because I was paying for it myself. That’s the thing with docs,” or “The good thing about SOMM is that you can explain it in one sentence: ‘The hardest test in the world is about wine, and you’ve never heard about it.’”

…Or at least maybe you hadn’t before he made his first film. Now with three SOMM documentaries under his belt, Wise is nearing completion of “SOMM4: Cup of Salvation,” which examines the history of wine’s relationship with religion. Wise says it’s “a wild film,” that spans multiple countries, the Vatican and even an active warzone. As he puts it, the idea is to show that “wine is about every subject,” rather than “every subject is about wine.”

For Wise, the transition to launching his own streaming service came out of his frustration with existing platforms holding too much power over the value of the content he produces.

“Do we want Netflix to tell us what our projects are worth or do we want the audience to do that?” he asks.

But unlike giants in the space, SOMMTV has adopted a gradual approach of just adding small bits of content as they develop. Without the need to license 500 or 1,000 hours of programming, Wise has been able to basically bootstrap SOMMTV and provide short form content and other more experimental offerings that typically get passed over by the Hulus and Disneys of the world.

So far, he says, the experiment is working, and now Wise is looking to raise some serious capital to keep up with the voracious appetites of his subscribers.

“Send those VCs my way,” Wise jokes.

Subscribe to PCH Driven on Apple, Stitcher, Spotify, iHeart, Google or wherever you get your podcasts.

dot.LA reporter David Shultz contributed to this report.