These Were the Top CRE Stories for Los Angeles in 2022
By Greg Cornfield December 28, 2022 6:50 pm
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It was a wild year for commercial real estate in Los Angeles, to say the least.
We saw a major tech pullback that seriously strained an already frustrated office market, an unprecedented shakeup at City Hall after yet another scandal, and studio development plans continued to pile up. And while all that was going on, Southern California’s industrial machine continued to churn out major deals while demand remained sky high.
Here are the stories that defined the industry in 2022 for the City of Angels.
Tech reset
It seemed like every big tech and media company was affected: Amazon (AMZN), meta, Netflix (NFLX) and more. The homegrown streaming giant Netflix, which for years defined both the office and streaming markets in Los Angeles, put up big office blocks for sublease, and it was one of the first big-name companies to lay off hundreds of office employees.
Facebook’s parent company Meta followed by announcing thousands of layoffs and that it was spending $2.9 billion just to shrink its office footprint before 2024. Amazon similarly cut thousands of office employees, and last month JPMorgan started looking for buyers for its trophy office campus in Santa Monica that’s leased to Amazon, which was one of the biggest signs that investors are losing confidence.
Office woes and growing uncertainty
The tech reset was another big blow to the overall demise of office real estate as we know it. Interest rates rose throughout the year, vacancies rose too, and rents softened as the great return to the office after the pandemic sputtered out.
There were several casualties along the way. Most notably, the owners of the Broadway Trade Center, which has been in limbo for close to a decade, filed for bankruptcy in the summer and forfeited the property to lender Starwood earlier this month. Hudson Pacific Properties also ditched some of its underperforming offices, including a 12-story office building on Hollywood Boulevard that sold for just $3.5 million more than Hudson paid in 2011.
Unethical City Hall
Los Angeles City Hall was again rocked this year after an audio recording leaked of a private conversation between council members that included a barrage of racist and disparaging comments. It led to the resignation of Council President Nury Martinez, and the developers of one of the biggest projects downtown said they will no longer work with the city while Councilman Kevin de León remains in office and refuses to resign.
The event shook the city nearly one year after a federal grand jury accused Councilman Mark Ridley-Thomas of accepting bribes from University of Southern California, and about two years after former council members were indicted for taking bribes from developers and creating “a money-making criminal enterprise” out of the city’s entitlements process. For the latter, more convictions were handed down this year.
And all this comes as a higher-than-usual number of other city council members were voted out of office in November, meaning City Hall will look drastically different than it did to start 2022.
Rep. Karen Bass defeats developer Rick Caruso
Congresswoman Karen Bass was sworn in as the new Mayor of Los Angeles this month. She defeated billionaire developer Rick Caruso in a contest that focused on the hopeless homelessness crisis, as well as the handful of recent scandals at City Hall that upended trust in government.
With a new administration comes new hope for broader transformation, and the expectation for new action in addressing the city’s most dire issues. The homelessness crisis permeates throughout the region, and Bass declared a state of emergency for the crisis right after being inaugurated. But she’s also tasked with cleaning up City Hall after the aforementioned discrepancies.
Studios, studios and more studios
This year brought in another string of plans for future soundstage and studio development, with more investors tapping into the streaming wars playing out in Hollywood. For example, BARDAS and Bain Capital announced another $600 million studio project, and East End Capital plans to add 10 soundstages to its growing pipeline. Even Prologis, one of the biggest industrial titans in the world, submitted plans for a studio complex in L.A.
And of course, the heavy hitters made plenty of noise, too. Hackman Capital closed a fund at $1.6 billion this year to acquire, develop and manage studio space around the world, while Hudson acquired production services company Quixote Studios for $360 million.
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
