One of PMI’s partners, Jeffrey Palmer, was featured in the latest edition of the Los Angeles Business Journal. Click the link below to read the article in its entirety.
New York has recaptured most of the jobs lost there during the recession. Mayor Michael Bloomberg has done a great job at attracting technology tenants to the Big Apple. For example, Google has a million square foot facility in the Chelsea area of New York. That space trumps its 100,000 square foot facility in the Venice area of Los Angeles. The music sharing service Spotify, and Livestream, the market leader for live event coverage, are also located in New York. There is a website, called Made in NY Digital Map, that points out digital and tech tenants located throughout the city.
Not only is New York attracting tech and digital tenants, but they are also starting to court a substantial piece of L.A.’s film post-production business with a recent tax credit. New York Governor Andrew Cuomo recently enacted this law, which increases the previous 10% credit to a whopping 30% on post-production costs. If a company wants to earn a slightly larger credit, they can venture to upstate New York and get a 35% credit. New York is aggressively going after L.A.’s post production business, which has a heavy concentration on the Westside of Los Angeles. This is the first type of post-production credit the industry has seen. Time will tell if companies will move to the East Coast to take advantage of it.
New York has been having an astounding year in TV production, mainly because of its film tax credit program. They are setting aside more than $400 million a year in order to attract film and TV productions. Compared to the $100 million that California spends, one has to wonder why they aren’t putting up much of a fight against New York.
The Los Angeles Times goes more in-depth about this subject in their recent article.
Office tenants, especially in digital technology, continue to fit more people into the same amount of space. Open floor plans and higher ceilings support this greater density. In Los Angeles, workers drive to work and parking is limited. The normal office building has three parking spaces per 1,000 square feet of office space. All the while, office density is growing to five users per 1,000 square feet and greater. Companies want to supply parking for their employees. They don’t want to force their employees to carpool, have to take transit, walk more than very short distances to park, or have to ride a shuttle. This reality is hard on planners. It will be a good idea to begin to introduce the Los Angeles creative work force to these alternative methods. The reality is that brokers and tenants are requesting additional onsite parking more frequently. Densities are continuing to go up and building owners, brokers, and companies need to deal with issue.
Los Angeles is finally gaining some success in finding a way to apply its creative talents in media and entertainment to the web. As a result, a new emerging industry is forming that combines artist’s talents with digital tech expertise. These companies produce original video content for the web. Below are some stories on couple of these firms.
When PMI first started looking to purchase office buildings in 2003 in San Francisco, a couple of brokers tried to sell us buildings in San Francisco’s Mid-Market areas. They said it was going to make a comeback. Most others said that they had heard that for years. The area had a large population of homeless people, homeless shelters, and single room occupancy housings. We were told by all the cognoscenti to stay away.
In 2010, San Francisco boomed with tech tenants. Super star tenants found it difficult to find very large blocks of space in prime areas like SoMa. One of our tenants, Twitter, started in 6,000 square feet. They were a runaway success and started shopping for 150,000 square feet with expansion options for another 150,000 square feet. Twitter threatened to move out of San Francisco because of a city payroll tax that would tax stock options upon their exercise. San Francisco Mayor Ed Lee set up Mid Market as a payroll tax-free zone. Real Estate magnate Shorenstien Properties then purchased a million square foot clunker of a building in Mid Market, planned a creative office renovation, and made Twitter a deal they could not refuse.
Another one of our tenants, Zendesk, moved to Mid Market because we were out of space in our SoMa building. Zendesk got a great deal and achieved their rent objectives. Yammer, who is also our tenant, moved into the same building that Twitter did after Kilroy wanted too large a letter of credit as security (Yammer was recently purchased by Microsoft–who knew).
So why is it that Mid-Market succeeded this time? Primarily it is because Twitter became a magnet that attracted other tech tenants. Mayor Lee and Shorenstien Properties offered Twitter such a fantastic deal they would have been crazy not to accept it. This was done during a market where creative space was running low because tech business was booming.
In the New Geography of Jobs, Berkeley professor of economics Enrico Moretti comments that super star companies attract other super stars and even “wanna-be” companies like a magnet. Indeed, he attributes the success of Seattle in tech to the fact that Bill Gates decided to relocate there to scale Microsoft. In San Francisco, Twitter was the super star and it attracted other companies, like Yammer, among others. The payroll tax-free zone and a landlord willing to give a cost leader to attract a super star helped.
Here is an article from Reuben and Junius expanding more on the rebirth of Mid-Market.