Report: Why LA Is a Best Bet for Tech Startups

A new tech office report from JLL gives LA a 71.8 market score, with overall asking rent at $35.27. LA’s score is similar to the Silicon Valley, which has slightly higher asking rent at $41.68. Bisnow caught up with JLL VP Blake Searles, who specializes in creative office leasing, Tuesday when the report was released to get a detailed perspective on what’s happening in the LA region’s tech office market.

Blake (here with wife Rachel at a recent USC game) tells us LA’s score is in the middle for startup cost and opportunity, indicating a regional trend of momentum for startups across Los Angeles. “The biggest comparable difference to markets in Northern California is the scale of venture funding and its resulting salaries that can be offered to talent,” Blake stresses, noting the cost per employee, including salary and office space, is highest in the Silicon Valley and San Francisco markets.

The market score measures tech economic momentum, talent pool, startup friendliness and market costs. Wages for tech talent, however, are lower for LA for startups, with LA wages averaging $101,168, compared to the Silicon Valley’s $211,906. Recruitment and retention of talent and availability and cost of space are major challenges in both markets, but more pronounced in Northern California than in SoCal.

He says that Santa Monica and Venice are still the primary neighborhoods among tech office users, because there’s an attraction to a live/work/play environment. There’s an established startup base already in place; availability of young, creative talent; a truly walkable environment; the lure of the beach; a hip culture; cool restaurants; and a mix of housing choices, Blake notes.

Constraints on building new office product in Santa Monica have increased rents and caused some large creative office users to move out of the area. “The campus district—the Water Garden and Colorado Center (pictured)—are part of the market losing tenants to Hollywood and Playa Vista,” he says, noting that Yahoo and Group M, a global advertising firm, have relocated to Playa Vista, and Viacom is relocating to Hollywood.

Blake says Playa Vista is extremely attractive because, as a master planned community, it offers a mix of uses and is centrally located, with easy access to the 405/San Diego Freeway. While Playa Vista’s live/work environment is not as organic as Santa Monica’s, it offers a variety of retail, community and recreational amenities; lots of housing at different price points; an abundance of office space, both new and repositioned industrial (pictured is The Ratkovich Co’s 530k SF Hercules campus at Playa Vista); and there’s still plenty of room to grow.

Hollywood, on the other hand, has a growing concentration of tech/entertainment companies. Viacom is consolidating some of its cable properties at a 180k SF space in the old CBS Studios (pictured) on Kilroy Realty's new Columbia Square campus on Sunset Boulevard. Netflix is relocating from Beverly Hills to 200k SF in Hudson Pacific Properties' new Icon building on Sunset on the Sunset Bronson Studios campus.

Venice is another attractive market for tech office users, but space is very tight, because the majority of office space—other than Google’s campus (pictured) on Main Street—was created by utilizing lofts and live/work space, Blake adds.

He also notes El Segundo is getting an overflow of tenants seeking lower occupancy costs. For instance, Guthy Renker, a direct marketing firm, relocated its HQs from Santa Monica to 90k SF in El Segundo earlier this year. “El Segundo is business friendly and has a lot of new creative product (pictured is Elevon, a new 210k SF creative office campus in El Segundo) created by converting old industrial buildings to office space,” Blake continues, noting that the city does not impose a gross receipts tax on businesses.

Meanwhile, Blake says there’s lots of momentum and investment capital flowing into the Downtown LA Arts District, which has 5M SF of historical industrial buildings (pictured: 1930s Coca-Cola bottling plant) being converted to creative space. “The product in the Arts District is spectacular,” Blake comments, but the challenge will be to get people to commute there. I don’t know if one big player will move the needle or if it will be absorbed by organically grown startups choosing to be there instead of in West-end markets,” he adds.