The Land of Endless Summer

santamonica-siliconbeach
The beach scene in LA

When jobs leave the Bay Area, in larger numbers they are leaving for Southern California.

THIS ARTICLE WAS PUBLISHED IN THE ‘Q’ – THE REGISTRY’S PRINT PUBLICATION – IN MAY 2015

By Nancy Amdur

[dropcap]W[/dropcap]hile Silicon Valley has a worldwide reputation for its high-technology industry, another California tech hub is also thriving: Los Angeles’ Silicon Beach.

Silicon Beach, an approximately three-mile span that takes in Santa Monica and Venice on the city’s Westside, is home to hundreds of tech companies. The roster includes high-profile brands such as Hulu, game publisher Riot Games Inc. and start-up photo messaging app Snapchat Inc. It also has large outposts of Google, Netflix, Amazon and Pandora Media.

“Silicon Beach has become more established,” said Henry Gjestrum, a Los Angeles-based senior analyst for office research at real estate and investment management firm Jones Lang LaSalle Inc.

It makes sense that Los Angeles and environs would attract tech firms, local real estate brokers said.

“L.A. has always been a hotbed for innovation,” said Gary Baragona, director of research and analysis for CBRE Global Research and Consulting in Los Angeles. Aerospace, media and entertainment have historically had a large L.A. tech presence, but now social media, gaming, Internet, e-commerce and fashion design tech firms are in the mix, he said.

Silicon Beach Tenant Migration Map (Source: JLL) CLICK TO ENLARGE
Silicon Beach Tenant Migration Map (Source: JLL) CLICK TO ENLARGE

“We like to say that we have the ‘sexy tech’ down here,” said Carl Muhlstein, a managing director in Jones Lang LaSalle’s downtown Los Angeles office. “That’s content related—we don’t make routers, we don’t make driverless cars…there seems to be more content related, social media and new media activity down here.”

Already Silicon Beach office space is filling up and getting pricier, so tech companies are beginning to spread into Playa Vista, El Segundo, Culver City and downtown Los Angeles, local real estate brokers said. Burbank and Pasadena also are seeing more tech activity.

“The boundaries have been expanding,” Muhlstein said. “There’s no one submarket that can hold all of these [companies]. They’re becoming too large.”

Several companies have expanded their space by three to 10 times in the past few years, Muhlstein said. As an example, content delivery network Verizon/EdgeCast this year signed a 135,000-square-foot lease in Playa Vista after vacating 50,000 square feet in Santa Monica, he said.

In West L.A., eight of the top 10 office deals in 2014 were technology or media/entertainment companies, Baragona said. These include a 134,000-square-foot Santa Monica lease inked by automotive research company Edmunds.com and Yahoo Inc.’s 130,000-square-foot lease in Playa Vista.

New Media Tenants Grow Their Footprint (Source: JLL) CLICK TO ENLARGE
New Media Tenants Grow Their Footprint (Source: JLL) CLICK TO ENLARGE

Playa Vista’s emergence as a tech zone was underscored in December when Google scooped up about 12 acres there, next to the historic hangar where aviator Howard Hughes built his “Spruce Goose” airplane. The land carries entitlements for approximately 900,000 square feet of commercial development, said company spokeswoman Meghan Casserly. Google also “remains committed” to its 69,000-square-foot office in Venice, Casserly said.

Facebook Inc., Microsoft Corp. and broadcaster TMZ also occupy space in Playa Vista.

In 2013, the high-tech industry accounted for 9 percent of all employment in Los Angeles County and employed more than 368,500 people, more than any other metropolitan region in the nation, according to an October 2014 report by the L.A. Economic Development Corp. That beats Silicon Valley’s Santa Clara County, which employed 313,260 in the tech industry.

Light rail already connects downtown Los Angeles with Culver City. The Metro system’s Expo Line should have service all the way to Santa Monica early next year, according to Rick Jager, a Metro spokesman.

Los Angeles housing is expanding to accommodate some of this industry growth. For example, Muhlstein noted that 2,500 residential units are under construction in Playa Vista and another 10,000 units are slated for downtown Los Angeles.

As far as tech culture, Silicon Beach’s and Silicon Valley’s geography creates a notable difference.

“In San Francisco, you feel like you’re very aware of all the different companies there, because it’s very easy to get around,” said Tara Tiger Brown, who moved to Los Angeles in 2008 after working in San Francisco at music startup Topspin Media, which was later purchased by Beats Music and then by Apple.

“When I first got to L.A., I was struggling to find out where startups were,” said Brown, who is a co-founder of KitHub and L.A. Makerspace. “You don’t necessarily walk to your local coffee shop and it’s all about tech, tech, tech like it is in San Francisco.”

Meanwhile, Brown also is noticing tech companies leaving Silicon Beach for other nearby districts. She recently moved her office to Culver City from Santa Monica because the beach town “is incredibly expensive,” she said. Also, Culver City was more centrally located for employees.

The average asking office rent in West Los Angeles was $3.70 per square foot for the fourth quarter 2014, according to a report by commercial real estate firm Colliers International. Silicon Valley’s average rent totaled $3.35 during that same period, reported real estate brokerage DTZ. However, average office rents in Silicon Valley’s Highway 101 Tech Corridor soared to $6.44 per square foot.

Though price is important, tech companies also want access to talent and proximity to other tech firms, local real estate brokers said. Los Angeles tech companies can recruit from many area colleges, such as the University of California Los Angeles and the California Institute of Technology.

Signals of sustainable tech growth in Los Angeles include increased interest from funding sources and tech talent nationwide seeking local jobs, said Robert Lambert, who founded Silicon Beach L.A. in 2011 to help connect the area’s startup tech community and whose company also hosts a tech industry job board.

“We see a substantial number of individuals starting to look and make the move from [areas including] New York, San Francisco, Seattle and Boston,” Lambert said. “L.A. is firing on all cylinders.”

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