Private Buyers Are Spending More Money In LA's Office Market As Institutional Capital Pulls Back

Buyers are dipping their toes back into the office investment market in Los Angeles, but the profile of who is buying has changed dramatically. Where institutional investors were responsible for nearly 50% of LA office purchases by volume, this year they’ve only made 5% of the deals.

Taking the place of these institutional buyers are smaller, nontraditional office owners like family offices, private equity and other sources of private money. But this new breed of office owner has to learn how to manage these types of properties — and how to work with a marketplace that might hesitate at their inexperience. 

“The brokerage community is so used to dealing with institutional landlords,” but some of these newer, private owners may not be as familiar, and that can work against them, CBRE Chairman Todd Doney said.

Every year since 2020, private buyers have stepped up and taken the biggest share of sales by volume in LA. In 2022, 61% of office sales by dollar amount went to private buyers, and in 2024, 61.7% of transactions by volume have been to private buyers.

“The buyer pool on the institutional side has gotten smaller, and it's been complicated and compounded by the fact that the illiquidity in the financing markets makes it difficult for those players to purchase these properties,” Doney said. 

What’s left, in many cases he’s observed in Downtown, is a buyer pool of people who can pay cash for an office building and who have a long-term view of the office sector. That pool, at least in Downtown, where Doney focuses, is largely populated by family offices, high net worth individuals and foreign capital.

Some of the private buyers who have come on the scene in the last year have been new to office ownership, while others have been office veterans. Some private buyers, such as the foreign investors that purchased Downtown’s 801 Tower and 777 S. Figueroa, aren’t publicly known. 

Brokers can be hesitant to get clients involved with landlords and buildings where the landlord doesn’t come with a track record or is largely unknown, Doney said. 

Andrew Shanfeld of Carolwood LP, co-owner of the Aon Center in Downtown LA, said Carolwood was cognizant of this potential hurdle, and it is part of the reason the ownership group includes a veteran office owner, SRG Properties’ Daniel Abrams, as well as Colliers Senior Vice President Adam Tischer, a veteran of the office market. 

“We knew that going in, and we got ahead of it,” Shanfeld said.

The ownership team acquired the 1.1M SF Aon Center in late 2023 for $147.8M. 

The plan to make the Aon Center successful involves upgrading common areas and shared amenities. The gym will get a cold plunge, and luxury cars will be purchased for tenants to take clients out. 

But owners will also make careful decisions about fixing up and leasing out space.

“One of our biggest challenges as investors is to determine how not to buy the building twice!” an investment memo penned by Carolwood and posted on Substack says. “Meaning, we don’t want to spend equally as much on leasing costs as we did to buy the buildings.”

“You have to, ideally, lease up space that a previous tenant has put a lot of work into, and look for tenants who maybe want a little bit less of a face rate and don't require as much [tenant improvement],” Shanfeld said. 

Some tenants’ flight from buildings owned by landlords hamstrung by their prepandemic basis has worked in the Aon Center’s favor, Shanfeld said. 

Those landlords might be less likely to invest in tenant improvements.

“That has allowed us to capture some of the tenants who may otherwise have leased in other buildings,” Shanfeld said. 

Shanfeld said ownership hopes to have occupancy “north of 80%” in the next few years, hopefully faster. 

Across town in Westwood, new owners of 1640 Sepulveda Blvd. have a similar sense of confidence over a very different office building. 

Harbor Associates and F&F Capital Group bought the property, formerly known as Westwood Terrace, for $45M in late 2023. The property is close to the 405 Freeway and Century City, the darling of LA office markets. 

Harbor Associates has “a comprehensive capital improvement plan” underway at 1640 Sepulveda that it anticipates will take a few years to complete. Ownership plans to address deferred maintenance at the property, upgrade amenities and build out spec suites to attract new tenants.

The cost and time it takes to build out an office is a top concern for tenants, Harbor Associates principal Joon Choi said. 

“We think that that's probably the best place to spend money, is to kind of incentivize the brokerage community, provide good products and good spec suites, and taking also some second-generation vacancies and giving them a bit of a face-lift so that it's more desirable for tenants,” Choi said. 

“I don’t think we’re all that shy about spending capital,” he added. 

Both Choi and Shanfeld said their groups are seeking more of the right opportunities to buy office properties. 

“We absolutely plan to buy more Class-A office buildings and implement strategies that have worked for us,” Shanfeld said.