In one of the largest corporate relocations in Los Angeles this year, real estate engineering firm Arup has agreed to move its regional offices from the growing beach community of Playa Vista to downtown’s newest skyscraper: Wilshire Grand Center. Arup will leave its offices near Marina del Rey for three floors in Wilshire Grand, a 73-story tower completed last year that houses an InterContinental hotel and offices for rent.
The engineering firm agreed to occupy 66,000 square feet in a 15-year lease valued at $57 million. It is one of the biggest leases in Southern California in 2018 and reflects a recent trend of companies coming downtown from other markets, including trendy neighborhoods on the Westside and in Hollywood. Downtown rents have been rising as the neighborhood changes, but they are still significantly less than those on the Westside. Downtown landlords are asking for about $3.55 per square foot per month, compared with $5.78 a square foot in Santa Monica and $5.53 in Playa Vista.
As the newest high-rise downtown, Wilshire Grand commands some of the neighborhood’s top rents. Arup’s monthly rent will begin at about $4 a square foot. Arup’s move is also an expansion. The London firm expects to grow its L.A. workforce from about 250 to as many as 400 employees in the next two or three years, company principal Jim Quiter said.
It currently occupies about 38,000 square feet on Jefferson Boulevard in Playa Vista, where it has been for more than a decade, but is expected to decamp for downtown in December, Quiter said. He hopes the new location will be good for business. “When we moved to Playa Vista, many of our clients were on the Westside,” he said. “Over the years, many of them have moved downtown. It’s also sort of the center of our industry. You see people on the street who make decisions, and that’s where we think we belong.” Downtown should also help with recruiting new employees, in part because it is a transportation hub. A subway station serving multiple train lines is across the street from Wilshire Grand. “We pride ourselves on being green,” Quiter said, “and right now to get to our offices you have to drive.”
Wilshire Grand, which cost $1.35 billion to build, is the tallest building west of the Mississippi at 1,100 feet. Prominently displayed in lights near the top is the logo of its owner, Korean Air, which alternates with the InterContinental logo. Arup’s logo
will join the rotation, the brokers said. Wilshire Grand is the first new office high-rise to open downtown in more than two decades. An office building boom in the late 1980s and early 1990s left the market oversupplied with rental space when the economy turned down and office construction came to a halt. In the last 15 years, however, new apartments and condos have attracted thousands of residents — and the long-suffering white-collar office market is starting to turn around as more businesses follow them to the urban core.
The downtown office market is still regarded as soft with 17.8% vacancy in the first quarter compared with 14.9% overall in Los Angeles County, according to property brokerage CBRE.
A trend of business relocations to downtown from other neighborhoods has been going on since about 2015, Colliers broker Nathan Pellow said. They often have chosen to occupy former industrial buildings in the trendy Arts District. “This is one of the first straight relocations to the central business district of this size in quite some time,” said Pellow, who represented Arup along with LegacyNY partners Ken Fishel and Jessica Jaber, in the lease.
Other recently announced moves include Spotify’s agreement to leave West Hollywood for 115,000 square feet in At Mateo and Adidas’ decision to exit Hollywood for 31,000 square feet in the Row DTLA, both in the Arts District.
Arup’s move is a loss for Playa Vista. But the market, which includes the former sprawling headquarters of Hughes Aircraft Co. founded by aviation mogul Howard Hughes, has emerged over the last several years as a desirable destination for young companies in technology, entertainment and other creative fields.
Among the businesses there are Facebook, Google and architect Frank Gehry’s firm Gehry Partners.