Office Commercial Real Estate

Most of the nation’s, and Los Angeles’ business activities are oriented to an office environment. Every profession, government agency, financial institution, corporation and business needs an office space to house their business activities. However, depending on the existing market absorption rates, office properties are the most prone to high vacancy rates. Specifically, vacancy in the downtown LA market has not been lower than 20% for over 30 years. Woodland Hills office properties have about a 14% vacancy currently and Nationwide the vacancy rate averages at about 16%. Yet the right building, in the right location and with the right type of tenants can earn the investor a solid return with the right amount of market knowledge about the national trends.

 

Commercial Office Property Sub-types

There are several different sub-types. We also have a video which has examples on our website.

 

Garden style office properties

Garden style offices are typically found in suburban areas consisting of 5-50 units. Contained in one or more one to three story buildings, clustered around a courtyard with tastefully landscaped areas, these are usually occupied by professionals in law, accounting and medical fields. They are a business version of garden style apartments.  The congestion of downtown and inconvenience of crowding has moved most of these to suburban areas. In addition to quick accessibility from suburban homes, many of these offer additional amenities such as recreational facilities, dining areas, and gyms. The office of Moschetti Commercial Real Estate is located in a garden-style office building.

 

Low-rise office properties

Low-rise offices are typically found in either urban or suburban areas with 5-50 units in a single one to five-story building.  On average, they offer 5,000-50,000 square feet of rentable space. A prime location is not an over-riding factor for many tenants of these types of buildings. Profitable investments can be made in offices located on secondary streets, enabling investors to offer somewhat lower rents, while still attracting good quality tenants.

 

Mid-rise office buildings

Mid-rise offices are found in both urban and suburban areas with 50-100 units in a single 6 to 10-story building. They range in size from 30,000 to 100,000 square feet.

 

High-rise office buildings

Are primarily found in urban areas with over 100 units with 10 or more stories, and 100,000 to over 1M square feet. A great example is the Library Tower in Downtown L.A., which is a seventy-story, class A building with 1.4M square feet. Another is the Warner Center Towers which is a campus of 6 buildings making up 1.9M square feet of class a office space in Woodland Hills.

 

Office Building Classifications

Office building are classified as class A, B, and C.

Class A are the newest office buildings, located in desirable areas of town, with latest architecture and great amenities including security, secured parking and controlled access. These building offer the most modern functionality.

Class B and C could be located in less desirable areas and offer simpler amenities with less efficient layout as compared with class A properties. Class B and C buildings are more affordable and are leased by tenants for which location is not the prime factor of business’s success.

 

Investment Strategy

The office building that could either be added value to or repositioned for the right tenant or mixed use is always a great purchase for a savvy investor. It could also be a good investment for user-investor, someone who uses the building for one’s business needs and takes advantage of building’s appreciation, as well as tax benefits. Lease versus own is the analysis that needs to take place for any business owner considering leasing or purchasing an office building. Applying the most relative analytics along with the analysis of one’s risk tolerance and upside potential of each specific investment, help identify the best properties for both investors and users.