Harbor Associates’ Paul Miszkowicz On Office Market Shifts and L.A.’s New Normal

Welcome (finally) to the new era of office real estate in Southern California — which is performing better than you think.

Investment firm Harbor Associates has been making moves that reflect the shifting dynamics of Greater Los Angeles’ office market — where office investment sales jumped nearly fivefold in the first half of the year compared to 2024. In fact, in terms of dollar volume, Greater L.A. had the nation’s fourth-most office investment sales, with $1.4 billion in the first six months of 2025, according to recent data released by Yardi Matrix.

Earlier this month, El Segundo-based Harbor, in partnership with The Roxborough Group, closed its largest-ever deal, acquiring a two-building, Class A office campus in Pasadena for about $120 million — roughly half the property’s 2016 price. Harbor says it is now one of the largest office owners in “North L.A.,” which the firm defines as the areas that include Pasadena and stretch as far west as Aurora Hills and Westlake Village, and as far north as Valencia.

The Pasadena deal also comes as office development continues its rebound from a pandemic-era standstill now that investors have clearer pricing benchmarks, and “flight to quality” becomes more a way of doing business than a market trend.

Commercial Observer spoke with Harbor Associates Principal Paul Miszkowicz about how L.A.’s office market got here, what led his firm to the Pasadena Towers deal and where demand is moving forward.

This interview has been edited for length and clarity.

Commercial Observer: With Pasadena Towers being Harbor’s largest-ever deal, can you talk about what drove that conviction?

Paul Miszkowicz: Quality, location and a great opportunity.

From a macro perspective, Downtown L.A. is still struggling with tenant demand, while markets like Century City and the Class A supply in Pasadena are performing very well. We’ve seen professional services firms — law offices, finance, insurance — shift from Downtown toward these submarkets.

If the decision-makers or employees live on the Westside, they gravitate to Century City; if they’re from the east side or the San Gabriel Valley, Pasadena is attractive.

Can you share your near- or long-term plans for Pasadena Towers?
The property already has great features — a high-quality gym, a large conference room, attractive common areas. But over time, those fade as tenant preferences change.

So, we have a renovation budget and we plan to modernize the lobbies, upgrade the courtyards and refresh common spaces. Renovations are set to begin in 2026.

Office investment in Greater L.A. has picked up significantly this year, even though values remain well below pre-pandemic peaks. What’s driving that increase in activity?
A lot of it comes from tenant demand. Companies now have a better sense of how they’ll use office space, and there’s a clearer pattern in what tenants want. That’s creating more data points on both the leasing and sales sides, which gives investors transparency to coalesce around market value. 

Buyers and sellers are finally aligning after years of uncertainty, and distressed or bank-owned sales have helped set those benchmarks.

So buyers and sellers are finally coming to an understanding of where the market is and what values really are?

Right. We knew what values were pre-COVID, but then there was thin velocity. Buyers didn’t want to buy at an 8 percent cap rate if the market was at 10 percent cap rates, and sellers didn’t want to sell at a 10 percent cap if the market was an 8 percent cap. 

So it has taken those bank-owned and REO assets and distress sales to provide the market with the data needed to transact more efficiently.

For lack of a better expression, would you say we’re advancing into the “new normal” for the market?
I think so. We’re seeing what works and what doesn’t. For us, that’s meant focusing on higher-quality office in better locations. 

Pre-COVID, you could buy a Class B commodity building and execute a value-add plan relatively easily. Now, that’s much harder. So we’re more selective than we used to be, and our focus is on better-quality real estate and locations.

Class A trophy properties in Pasadena are 90 percent leased, while the broader market’s vacancy rate is in the 24 percent to 28 percent range. 

So that tells you the market is strong. But what we’re seeing is a lot of tenants are downsizing their square footage while upgrading to Class A space, but they can still keep their rental budgets roughly the same. They’re trimming space but paying more per square foot to get better environments and amenities.

It’s not a secret employers want their employees back in the office. It’s trying to create a better environment so it’s less like your boss has to pull your wisdom teeth, and more of a place that has quality and feels good. It’s part of creating a more attractive place to bring employees back — more carrot, less stick.

How has Harbor’s strategy shifted over the past few years?
Pre-COVID, we focused on middle-market deals with assets that were maybe too big for high-net-worth buyers, but too small for institutional investors — and we found an interesting niche applying institutional principles to those middle-market assets.

Now, we’re finding opportunity in larger acquisitions. Institutional and family office capital partners recognize office is coming back, and that it’s still pretty compelling, but they’re cautious about making such big bets. They kind of want to dip their toes into the water and make smaller $10 million- to $25 million-type equity check bets.

That means that for $100 million-plus deals, it’s going to require $40 million-plus of equity, and people are more reticent to make those larger bets on office. And that creates an opportunity to buy assets for outsized yields if you can find a willing partner.

We’ve shifted from medium to large transactions, focusing on better buildings and locations. We’ve also become more flexible. In addition to core office plays, we’ve converted offices to multifamily, to industrial, even demolished for townhomes or industrial outdoor storage yards. We look at zoning and land use potential a lot more than we used to.

Do you see Harbor’s portfolio evolving in the next couple of years? More adaptive reuse, or more core office deals?

I expect us to stay active on all fronts. With more pricing and market transparency, I think we’ll see increased transaction volume into the back half of 2025 and certainly in 2026 for our industry. We’ll keep focusing on Southern California — L.A. County, Orange County, San Diego and the Inland Empire.

Are there any other trends driving the direction of the market?

There’s a segment of buildings that were bought at peak pre-COVID prices that are now underwater. So the market is shifting more into haves and have-nots, who can’t transact and have to sit in a kind of purgatory. 

It’s about 20 to 30 percent of buildings in any market that are unable to meet the market, and that skews vacancy stats — a large portion of that vacancy. But the other 75 percent is healthier than headlines and broader statistics suggest.

Gregory Cornfield can be reached at gcornfield@commercialobserver.com.