New problems are arising with our mutli-level creative office warehouse conversions in San Francisco. Originally, these buildings were built for 3 or 4 people per 1000 square feet. But, venture backed tech companies have pushed the current density to 9 and 10 people per 1000 square feet. Luckily, because of great transit, San Francisco is not suffering from parking problems created by such density in Los Angeles.
However, some of the problems we face due to the new “collaborative densities” include the following:
- Wear and Tear: the common areas are getting trampled. Repair, replacement and refurbishment will now be more frequent.
- Elevator: one elevator for 40,000 square feet and four or five floors–you can imagine the demand and wait times with ten people per 1000 square feet. The elevator systems will need to be upgraded for better control and response times.
- Bathrooms: first, you need more toilet paper and paper towels. Forget the paper, you need more toilets and sinks. Maybe a bathroom reservation app is next.
- Stairwells: the stairwells are becoming more important. In San Francisco, people will use the stairs. Your stairwells become an important common area feature and method of access. The stairwells need to look good and be well lit. If you have a tenant on two floors without an internal stairwell, you need to deal with security from the stairwell and fire issues.
- Security: With smaller creative buildings, you do not have a security guard. Electronic security is very important. You need sophisticated control access at as many points as possible: lobby doors, elevator access, and suite access. Fobs are popular. Crime is on the rise, especially grab and runs. Tenants are more sensitive and aware of burglary risk–especially after an incident.
Squirl Restaurant Virgil Village
The Sqirl Restaurant at 720 Virgil provides a hip coffee shop restaurant experience appealing to the new millennials residents who occupy many of the newly renovated housing units in this East Hollywood neighborhood near the Sunset Junction. Previously, this area was devoid of such eateries. New hip restaurants and retail continue to fill the commercial streets adjacent the gentrifying neighborhoods in Echo Park, Silver Lake, Highland Park, and East Hollywood. Retail brokers are promoting York Avenue and Figueroa Boulevards in Highland Park as the next Abbot Kinney to drive up retail prices.
Inside the Sqirl
This cafe replaced the La Raza Market and Restaurant. Although some in the older population resent the changes occurring to the retail in their neighborhood , the Sqirl is still one of the few such establishments on Virgil Boulevard between Melrose Avenue and Santa Monica Boulevard. Gentrification takes decades and occurs in fits and starts. Currently, many homes have been renovated to appeal to younger home buyers and now many apartments are also being renovated.
Formerly La Raza Market and Restaurant
Cain Hoy Enterprises, a Greenwich, Connecticut private investment firm, shelled out $130 million for the 118,400 square-foot Class A office building at 100 N. Crescent Drive. This price equals a whopping $1,101 per square foot. The seller, New York’s Clarion Partners, purchased the building in 2012 from another private equity firm, Clarity Partners for $80 million, a 63 percent return in three years.
In April of 2000, Clarity Partners purchased the building from JP Morgan for a measly $37 million or $313 per square foot. Most forget that real estate values flat lined during the dot com boom. Everyone wanted to buy internet stocks, not real estate.
JP Morgan, in turn, purchased the property in October 1995 from the original developer: Tracinda Corporation. Now deceased billionaire Kirk Kerkorian owned Tracinda Corp and built the building in 1990 for his corporate headquarters at a cost of around $400 per square foot. The selling price in 1995 was $21.6 Million or $183 per square foot Unfortunately, office prices plummeted during the early 1990 recession.
Prime Beverly Hills properties continue to appreciate, just not always in a straight line.
Source: Beverly Hills Office Trades at Premium Price | Los Angeles Business Journal