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Category ArchiveJLL

Fitness App Runs Over to 1 WTC

Another tech tenant has landed at 1 World Trade Center.

Digital workout app maker Aaptiv has inked a five-year lease for a 16,962-square-foot prebuilt space on the 49th floor of the 104-story tower, according to landlord Durst Organization. Asking rent in the deal was $73 a square foot. Durst manages, leases and operates the 3.5-million-square-foot building, and the Port Authority of New York & New Jersey owns it.

“We are excited to have Aaptiv join the 1 World Trade Center community,” said Jonathan “Jody” Durst, the president of Durst Organization, in prepared remarks. “Our prebuilt program has been a tremendous success over the past four years. We can offer tenants premium offices in a short period of time and flexible lease terms, which is requisite for rapidly growing companies.”

Aaptiv was represented by JLL’s Jason Schwartzenberg and Will Stark. Durst Organization’s Eric Engelhardt handled the deal for the landlord in-house, along with Tara Stacom, Justin Royce, Barry Zeller, Peter Trivelas and Connor Daugstrup of Cushman & Wakefield. Spokespeople for neither brokerage returned a request for comment.

Aaptiv will move from the eighth floor of 1140 Broadway between West 26th and West 27th Streets in NoMad, at the end of April. The company’s app provides audio-based fitness classes, including strength training, running and yoga, and pairs the workouts with playlists.

The prebuilt program at 1 World Trade spans 381,668 square feet and nine floors, and it’s now 72 percent leased.

Source: commercial

Brookfield Properties Exec James Malone Joins Colliers International

James Malone, a well-known commercial real estate executive in Los Angeles, has joined Colliers International as a senior managing director overseeing the firm’s South Bay and West L.A. offices, according to an official announcement from Colliers.

A former vice president of leasing with developer Brookfield Properties (an operating entity of Brookfield Property Partners) and broker with JLL, Malone will partner with Colliers Executive Managing Director Hans Mumper to expand the firm’s presence in both pivotal Los Angeles markets. The appointment is part of the brokerage’s stated five-year goal to double the size of its business by 2020.

Malone’s deals include one of the largest lease transactions of 2017, when anchor tenant Bank of America extended and expanded its lease at its namesake plaza at 333 South Hope Street in Bunker Hill, growing within Brookfield Property Partners’ 55-story, 1.4-million-square-foot property to 218,000 feet from 164,000. Brookfield did not reply to a request for comment.

Malone, who earlier in his career was responsible for the marketing and leasing of mixed-use projects built by Catellus Development in both L.A. and San Francisco, also served as an attorney at the law firm Haight, Brown & Bonesteel in L.A., where he specialized in commercial litigation. He received law degree from Loyola Law School in L.A. following his graduation from UCLA with a bachelor’s degreein economics. After four years at Catellus, Malone worked at JLL for a 10-year period ending in 2013, according to this LinkedIn profile, and then moved to Brookfield from October 2013 until starting his new gig at Colliers this month.

In addition to his background in real estate and law, Malone formerly was in the National Football League, where he played briefly for the Tampa Bay Buccaneers and Cleveland Browns.

“There was no question in my mind that when James Malone, showed a strong interest in returning to the brokerage side of the business as a senior manager, someone who could partner with me in strengthening our efforts in our new West L.A. location and in the South Bay, there was no one else with his level of experience, or such a sterling reputation, in our pool of candidates,” Mumper told Commercial Observer. “He has everything it takes to succeed, including his work as a former top-producing broker for one of our major competitors, and even his experience as a practicing attorney. The fact that he attended UCLA, where he was a star linebacker for the Bruins’ football team for four years, may not immediately inure him to the many USC grads who work for us, but I think they’ll come around, too.”

Colliers greater Los Angeles presence includes its flagship office in Downtown Los Angeles, as well as offices in West Los Angeles, South Bay (El Segundo), Los Angeles North (Encino), Inland Empire (Ontario), Orange County (Irvine), Santa Clarita Valley (Valencia), and in the cities of Industry and Commerce with a total of 165 brokers, according to a company spokesman.

“The opportunity [at Colliers] fits with my long-term career goals,” Malone said. “My career was largely spent being a transaction person, executing deals. Colliers afforded me the opportunity to be in a leadership role in a global brokerage company.”

Malone, who lives in Manhattan Beach with his wife and two children, will oversee approximately 75 brokers in Colliers West Los Angeles office at 11911 San Vicente Boulevard and South Bay location at 2121 Rosecrans Avenue in El Segundo.

Source: commercial

NY-Based Flexible Workspace Provider Serendipity Labs Expands to Hollywood

Serendipity Labs, a flexible workspace operator based in Rye, N.Y., is planting a flag in Los Angeles, Commercial Observer can first report.

For its first L.A. location, the company last night signed a deal to sublease 36,000 square feet on the entire second floor from the defunct indie film company Broad Green Pictures at 959 Seward Street in Hollywood’s Media District for the remaining eight years of the lease. (Broad Green Pictures shut down its production division last August, as the Los Angeles Times reported.) Serendipity Labs opened today in the as-is Gensler-designed space, which includes a soundproofed, 25-seat screening room, editing rooms, a commercial kitchen and an event space. A company spokeswoman declined to provide the asking rent, but according to LoopNet, rents in the 2015 property range from $51 to $54 per square foot.

“For our first Los Angeles location, we are thrilled to be premiering at this spectacular site, and look forward to welcoming the Hollywood community to our growing network of workplaces across the country,” Serendipity Labs Chairman and CEO John Arenas said in a prepared statement.

Serendipity Labs, which was founded in 2011, offers workplace memberships that include full- and part-time coworking space, private offices, workstations and team rooms. It has 11 open locations, including the one in Hollywood, and 15 more slated to be up and running by the end of the year. CO broke the news when the company launched its first New York City location at 28 Liberty Street in partnership with UCommune (formerly UrWork), a Chinese coworking company, last June.

Maria Contreras-Sweet, who was slated to be the incoming owner of the Weinstein Companyhad considered taking the Broad Green Pictures space, as per a January Vanity Fair piece. But that deal didn’t pan out and Weinstein Company and its affiliates filed for Chapter 11 bankruptcy protection this Monday.

screening room2 NY Based Flexible Workspace Provider Serendipity Labs Expands to Hollywood
Serendipity Labs Hollywood has a soundproofed screening room. Image: Gensler

Michael Geller of First Property represented Broad Green Pictures in the deal and JLL‘s Brian Niehaus and Josh Wrobel represented Serendipity Labs. Geller, Niehaus and Wrobel didn’t respond to a request for comment, and nor did Jerome Snyder, a senior partner at J.H. Snyder Company, the landlord.

Tenants in 959 Steward, a two-building approximately 250,000-square-foot Class A creative office project, include the Formosa Group, Bold Films and HGST, LoopNet indicates.

 

Source: commercial

David Cheikin Leaving Post as Head of NY and Boston Region for Brookfield

David Cheikin, an executive vice president and the head of the New York and Boston offices for Brookfield Property Partners, is leaving the company after nearly 16 years, Commercial Observer has learned.

He resigned earlier this month, according to a Brookfield spokesman, but has agreed to stay on through the end of March. According to the representative, Cheikin “is going to pursue other opportunities.” One source said Cheikin “is going to take a vacation and look around after that.”

According to Cheikin’s LinkedIn profile, he has had “overall responsibility for the performance of Brookfield’s 25-million-square-foot commercial portfolio, inclusive of asset management, office leasing, retail leasing, property marketing, property operations and on site arts/activation.”

Ric Clark, the senior managing partner and the chairman of Brookfield Property Partners, said of Cheikin’s departure in prepared remarks: “Dave leaves Brookfield having had a significant impact on our New York and Boston business over his 16-year tenure. Among many other things, he was instrumental in overseeing the redevelopment and leasing of Brookfield Place New York, which has been a tremendous success by every measure. He also played a vital role in helping to position Manhattan West to become one of New York City’s most dynamic places upon its completion.”

Effective April 1, Ben Brown, a senior vice president at Brookfield Properties, will assume Cheikin’s position, the Brookfield spokesman said.

“Ben has been with Brookfield since 2010 in various roles of increasing seniority, including head of New York and Boston acquisitions since his return last year from London, where he held a similar position,” the spokesman emailed.

Cheikin, who was an analyst and associate at JLL from June 1997 to May 2001, declined to comment through the company spokesman and didn’t respond to an emailed request for comment.

Source: commercial

Hedge Fund Kepos Capital Inks 20K-SF Lease at 11 Times Square

Alternative investment firm Kepos Capital has agreed to move its Manhattan headquarters to a 20,000-square-foot space at SJP Properties11 Times Square, Commercial Observer has learned.

Kepos signed a 10-year deal last month for part of the 35th floor at the 40-story, 1.1-million-square-foot office tower at 640 Eighth Avenue between West 41st and West 42nd Streets, according to sources with knowledge of the transaction.

The firm is expected to relocate to its new Midtown West space in August from its current location just one block south at the New York Times Building at 620 Eighth Avenue, where it presently occupies around 17,000 square feet on the 44th floor.

Asking rent in the deal was not immediately clear. Paul Glickman and Diana Biasotti of JLL represented landlord SJP—which owns 11 Times Square in partnership with PGIM and Norges Bank—while CBRE’s Ben Friedland and Michael Movshovich represented Kepos

In a statement, SJP CEO Steven Pozycki said Kepos wanted to “maintain its presence in the city’s premier transit hub,” referring to 11 Times Square’s proximity to Port Authority Bus Terminal across Eighth Avenue and Penn Station several blocks south. “For today’s financial services firms, it’s critical to have an office that provides state-of-the-art connectivity and is outfitted with the latest technology infrastructure,” he said.

Matt DesChamps, Kepos’ COO, said in a statement that the new space’s larger footprint and the firm’s “ability to design the space to our requirements” provided it the “opportunity to create a customized work environment to serve our clients and support our growing business in the years ahead.”

“Kepos Capital joins a roster of leading financial and technology firms attracted to one of the city’s most advanced and sophisticated commercial towers,” JLL’s Glickman said in a statement to CO. Law firm Proskauer and tech giant Microsoft anchor the office building, which was completed in 2010.

Representatives for CBRE did not immediately provide comment.

Kepos was founded in 2010 by former Goldman Sachs partners Mark Carhart, Giorgio De Santis and Bob Litterman, who previously led the quantitative investment strategies division at Goldman Sachs Asset Management. The firm manages $3 billion in assets for a global base of institutional investors.

Madrid-based amusement park operator Parques Reunidos signed a lease last year to anchor 11 Times Square’s retail space, where it is developing a 45,000-square-foot indoor entertainment complex, known as Lionsgate Entertainment City, in partnership with film studio Lionsgate.

Source: commercial

Euro Retailers Sense Opportunity Here While US Brands Look to Old World for Salvation

Last week, while JLL retail pro Michael Hirschfeld was in London for business, he learned of three U.K. retailers collapsing.

Those were the U.K. arm of Toys “R” Us, which went into insolvency administration, Maplin Electronics, which failed to find a buyer to get it out of administration, and dining chain Prezzo, which is being restructured. In addition, the 600-fleet London fashion chain New Look is looking to make deals with landlords to close underperforming stores and reduce rents.

The news sounds eerily similar to headlines in the U.S. as bankruptcies, e-commerce and the popularity of discount department and specialty stores have impacted the retail business on both sides of the pond.

“I think the retail challenges are universal,” said Hirschfeld, a vice chairman of national retail tenant services at JLL who spends 80 percent of his time bringing retailers from Europe to the U.S. and vice versa.

This comes, however, with a big caveat.

It is often said that what happens in the U.S. market will then follow in Continental Europe and Great Britain. But JLL warned in a retail report comparing the U.S. and Europe at the end of 2017, “we shouldn’t assume markets automatically mirror each other.”

In Europe, and the U.K. in particular, retailers braced themselves for the change in shopping patterns due to e-commerce faster and earlier than did their U.S. counterparts, according to the JLL report.

And beyond the internet, there are clear differences between the two markets.

One of the big ones is the sheer amount of retail space available in the U.S., in large part due to an excessive number of shopping centers. In the U.S., there is 13,713 square feet of leasable shopping center space per 1,000 people, JLL determined at the end of last year. In the U.K., by contrast, there is 3,175 square feet per 1,000 people, and in Europe as a whole, there is 2,335 square feet.

And the European retailers smell the opportunity—many view the U.S. as if “it’s on sale,” Hirschfeld said. “You’re seeing rent levels that you could achieve in the financial crisis. It’s a very opportune time. The demand is super strong.”

Hirschfeld brokered deals to bring British clothing company Superdry to various cities in the U.S. and is working on a deal for British toy store Hamleys to come to New York City. Accessories brand Furla, which comes from Milan and already has a store in Manhattan, is expanding with a new lease in Aventura Mall in Miami, Fla. (one of the top malls in the country), and one in the Forum Shops at Caesars in Las Vegas (another top U.S. mall) with likely another three or four more in major markets, he said of his client.

Susan Kurland, an executive vice president and a co-head of global retail services at Savills Studley, said that the difference between retail in Europe and the U.S. is the vacancies.

“The difference is their spaces are filled,” Kurland said. “You walk down our Madison Avenue, and almost every store on Madison Avenue is available.”

She is working with a high-end Chinese-owned Milan-based company, which is looking to enter the U.S.

“[The owner] feels the only places to expand are China and the U.S. as those are the two most important markets,” the broker said. “They’re in…the exclusive places in China. They’re on the important street in Milan. He feels that the U.S. is really important for his expansion.”

While there will be more store closures in Europe, JLL determined that the continent is “unlikely to experience the sheer volume of closures currently being forecast in the U.S.”

Another distinction between the U.S. and Europe is that most of Europe employs a high-street model rather than a shopping-center model. Furthermore, in shopping centers, the U.S. has relied on department store anchors (which have been one of the worst victims of e-commerce and commoditization), JLL noted. In Europe, on the other hand, shopping mall owners have been quick to switch gears with their anchor tenants, often turning to food-and-beverage concepts, and they are more diverse in their offerings.

Yet another important difference between European and U.S. leases is the rent structure. In the U.S., when a tenant signs a lease it knows what the rent is for the entire term. In the U.K., for example, you may sign a 10-year deal, but every couple of years you go through a fair-market rent review process, Hirschfeld said, so you don’t know your rent.

But one thing both places have in common is that consumers have so many options for how they want to shop.

“We’re seeing across the board a fragmentation of distribution,” said Betsy McCullar of Hilltop Alliance, who develops and executes marketing and strategy solutions for brands and businesses. “Western Europe is even more fragmented than the United States because, for example, the U.K. and Germany—and France, to some extent—have a big mature structure of department stores. But Italy and Spain are still dominated by one-off specialty stores.”

Among the European brands that are on the fast track in the U.S. are fast-fashion brands Swedish Hennes & Mauritz (H&M), Zara from Spain and the U.K.-based Reiss Ltd., The Wall Street Journal reported in May 2017. Amsterdam-based Scotch & Soda is also popping up in the U.S. with 28 free-standing retail stores, with a store at Woodbury Common Premium Outlets in Central Valley, N.Y. opening on March 30. European discounters like German grocer Aldi, German competitor Lidl and Irish clothing company Primark are on a tear in the U.S., Bloomberg Gadfly pointed out last October. International cosmetics companies like Rituals from Amsterdam are taking New York City by storm. Plus there are food chains like Wagamama, an Asian food concept that actually hails from London, that has set up shop in New York City and Boston.

When entering the U.S., European retailers focus on major cities for entrée.

Since they’re used to high streets at home, European retailers want to rent on a U.S. high street. And they generally enter by way of one of the gateway markets of New York City, Miami, Los Angeles, San Francisco, Chicago and Las Vegas, Hirschfeld said. They often choose a U.S. location that is most similar to where they hail from, Hirschfeld said.

“Brands usually like to do either the East Coast or the West Coast initially, and I believe that most start on the East Coast first,” said Robin Abrams, a vice chairman of retail at Eastern Consolidated, with New York City being a priority due to its tourist population, ease of navigation, walkability and great public transportation. For U.K. retailers, New York is logical, Abrams said, “because it is more similar” than other places in the U.S.

Interestingly, CBRE’s most recent annual global retail report highlighted Philadelphia as a target city for international retailers in 2016. That year, Italian furniture company Natuzzi Italia and Superdry set up shop in Philadelphia, the fifth-largest city in the U.S. The market was appealing, the report said, because of its increased millennial population, income growth, new multihousing developments, burgeoning food and retail scene and reputation as a tourist destination.

But there’s no refuting that New York City often is the beau ideal market for European retailers looking to expand abroad.

21 Euro Retailers Sense Opportunity Here While US Brands Look to Old World for Salvation
SUITING UP: EUROPEAN WOMEN’S STORE SUITSTUDIO HAS FARED WELL IN BROOKFIELD PLACE SINCE OPENING LAST NOVEMBER. Photo: Brookfield Property Partners

“Retailers looking for a first or second opportunity look at New York,” said Mark Kostic, a vice president of retail leasing in the U.S. at Brookfield Property Partners. “Everyone’s next step is a global flagship in New York.”

Kostic worked on the deal to bring European suitmaker Suitsupply to Brookfield Place. The brand has fared well since the men’s store opened about a year ago, and the women’s store Suitstudio opened this past November, he said.

Jason Pruger, an executive managing director at Newark Knight Frank, said he will be helping Black Sheep Coffee expand from London into the U.S. come springtime. He anticipates that Black Sheep will enter the country by way of New York City.

“We are looking to expand in the U.S. because we have be inundated with customer requests, particularly in the last few months—mostly Americans living in the U.K. or who came across Black Sheep while visiting the U.K.,” said Gabriel Shohet, one of the co-founders of Black Sheep Coffee. “New York City has many Black Sheep fans but is one of four U.S. cities [including Chicago, Washington, D.C.. and Atlanta] we have shortlisted as a potential starting base for a U.S. market entry.”

Faith Hope Consolo, the chairman of Douglas Elliman’s retail leasing, marketing and sales division, said that New York City is “the shopping capital of the world, and the No. 1 leisure activity in this country is shopping. Yes, New York City is the center of the world. Companies are willing to risk everything to make it here. Just like the song goes, ‘If you can make it here, you can make it anywhere.’ ”

Going the other way, U.S. retailers often start in London for their European expansion, where English is the native language. Indeed, companies from the U.S. marked the majority of new international retail entrants to London in 2016, according to CBRE’s global retail report. (Hirschfeld called London “probably the retail capital of the Europe in many ways.”)

But London is desirable for just about any retailer looking to make an entrance on a global stage. “Overseas brands continue to see London as the pathway to greater expansion” in Europe, the Middle East and Africa, or EMEA, the CBRE report said. London was the second most-targeted market globally for international retailers entering new markets in 2016 (behind Hong Kong) and 10 markets in EMEA made the list of 19 global cities with the greatest international retailer presence. And this was the year of the Brexit vote for the U.K. to leave the European Union, so presumably the vote did not rock anybody’s faith in London retail.

At the end of last year, New York-based high-end fitness brand Equinox opened its first standalone E by Equinox location—an even higher-end Equinox—in central London. “Opening our first standalone E by Equinox in one of the most esteemed neighborhoods in London was only fitting,” Gentry Long, the managing director of U.K. operations for Equinox, said in a press release in December 2017. “We’re thrilled to introduce an elevated take on the private members’ establishment with fitness at its core.”

Some in-demand cities for U.S. retailers going abroad are Germany’s Munich, Berlin, Hamburg and Frankfort for fashion brands and food and beverage brands, Hirschfeld said. And there’s Paris, France and Milan, Italy. He has not seen a lot of demand for a Spain brick-and-mortar location.

In the last coupe of years, Hirschfeld’s team has brought Detroit-founded Shinola watch, bicycle and leather company to London. And his team brought Seattle-based outerwear company Filson to London.

“What you must look at when you’re looking throughout Europe, or Asia or South America is products that are transferrable to other markets,” Virginia Pittarelli, a principal of Crown Retail Services whose clients have included Sephora and Godiva, told Commercial Observer late last year.“That’s really the key.”

Source: commercial

WeWork Ups Pay for Brokers at Trio of Firms Who Find and Fill Coworking Space

WeWork has signed agreements with CBRE, Cushman & Wakefield and JLL in North America, offering brokers at the firms greater compensation if they find and fill coworking space, Commercial Observer has learned.

“WeWork is unique in that as we become more sales driven with our real estate approach we can partner with real estate firms on both sides—on the site selection and lease sourcing side and the client member introduction side,” Julia Davis, the head of transactions and analytics for WeWork, told CO. “We are hoping to leverage those relationships.”

Brokers at CBRE, C&W and JLL will get a 20 percent fee on a one-year lease and 5 percent on expansions and renewals. That compares to the sums WeWork has been offering individual brokers across the board for the last year: 10 percent on year one of a lease and 2 percent for expansions and renewals, Davis said.

“WeWork will partner with these firms on a non-exclusive basis to source a set (i.e. agreed upon) square footage for WeWork locations in North America, and in return, the [commercial real estate] firms will introduce new clients to WeWork, leading to more closed sales and strengthened relationships,” according to bullet points WeWork provided to CO. Davis declined to provide the square footage.

The idea is that the CBRE, C&W and JLL brokers will be “ambassadors” for the brand, Davis said. WeWork will “reward those CRE firms that introduce new members to WeWork with additional real estate sourcing assignments,” the company promises.

It seems that WeWork’s efforts to ingratiate itself in the broker community are working.

“One-and-a-half years ago, there was little [broker] contribution,” Davis said. “Now it’s 20 to 25 percent of desks on a monthly basis due to brokerages across all markets company-wide.”

The partnership initiative is starting in North America and if successful, WeWork will scale it globally and establish other such relationships.

A broker at one of the partner firms said of the agreements: “It is a minor development. Not even sure what it means other then we will get a few assignments as will the others to find them space and offer WeWork [spaces] to our clients as an option.”

Another broker, at a different partner company, said that while he would put a tenant in a WeWork space if it was appropriate, the increased payout would not compel him to do so.

The office-space provider business has been getting increasingly crowded, and one broker suggested WeWork has upped the ante to one-up the competition.

But WeWork is not the only office space provider forging relationships with brokerages. Knotel has partnered with Newmark Knight Frank and secured an undisclosed investment from NKF’s Barry Gosin. (Gosin is also an adviser to Knotel.)

NKF “is a very valuable partner of ours. In addition to the partnership, they made a financial investment,” Eugene Lee, Knotel’s global head of real estate and business development, told CO. “It’s an integration between Newmark and Knotel where they’re helping us find spaces and bringing spaces they represent into Knotel.”

According to a January press release from Knotel: “The partnership will allow NKF’s audience of owners and other clients to have streamlined access to Knotel’s footprint across New York City, San Francisco and London.”

Lee said that unlike WeWork, Knotel is not increasing the pay for NKF brokers.

“We are paying them standard rates as they would get compensated in a standard lease format,” he explained.

So why would a NKF broker be inclined to put a tenant in a Knotel space?

Knotel will “give preference to the company we have a relationship with,” Lee said, when faced with multiple companies competing for floors.

As for what WeWork is doing, Lee said, “When you’re having to give promotional commissions and pay brokers to bring you members, that’s generally a sign of weakness. In general if you’re discounting and giving out promotional incentives, it’s not a good sign for the business.”

Spokespeople for CBRE and C&W declined to comment. A spokesman for JLL didn’t respond to a request for comment and a NKF spokeswoman didn’t respond with a comment.

Source: commercial

Los Angeles Becomes a Mecca for Interactive Gaming and E-Sports

Interactive gaming is big business with an estimated 2.2 billion people who play video games worldwide. And Los Angeles reigns supreme, with many top game developers including Riot Games, Activision Blizzard, Electronic Arts and ESL Gaming headquartered here.

From the Westside to Burbank, Los Angeles currently leads the nation with 331 gaming companies operating in the metropolitan area and was second only to San Francisco when it came to being the largest employer in the industry segment (14,484 compared with the Bay area’s 16,466 employees across 307 companies, according to data from the Entertainment Software Association.)

JLL charted the locations of gaming companies—from Fortune 500 developers to related businesses—throughout town in a recent snapshot research report on the industry, dubbing the region a mecca for the sector.

Top dog Riot Games, owned by Tencent—which reported more than $12 billion in revenue in September 2017, according to Newzoo, a leading provider of market intelligence on global games and e-sports, or electronic sports—occupies 500,000 square feet of prime office space in West Los Angeles.

Furthermore, the interactive gaming industry’s impact on the office market in Los Angeles is poised to increase with the growing interest and investment in e-sports—multiplayer video game experiences and competitions in which players play against one another through a digital platform—which is driving additional demand for studio and creative office space, according to findings from a CBRE industry report released in December 2017.

Despite their sizable footprint, landlords have been skittish about entering into leases with gaming and e-sports businesses—which inspired the CBRE research report.

“Our clients and our brokers from several different offices around Los Angeles have seen some large tenants in the market looking for office space and a lot of these are new tenants to the market,” David Nusbaum, a senior research analyst at CBRE, told Commercial Observer. “They are venture-backed companies or privately funded e-sports companies that don’t have a long track record. The landlords’ concern was these tenants were new to the market. They didn’t have a credit history and a lot of these landlords were very hesitant to give high-end, Class A office space to [these] tenants.”

E-sports allow teams to compete in tournaments sanctioned by specific game developers. The field is evolving with the formation of leagues specific to popular games. Erase that outdated image of solitary players competing for bragging rights in their own domicile and enter major sports franchise owners and investors, broadcast rights and million-dollar arenas and studios being constructed to aid competitions.

Underscoring the trend, Blizzard Entertainment built out a 60,000-square-foot broadcast studio at 3000 West Alameda Avenue, at the site of the former Burbank Studios in Burbank last year for an undisclosed sum. Just this year, as the CBRE findings point out, two prominent North American leagues organized: Overwatch League and North American League of Legends Championship Series. Franchise fees range from $10 million to $20 million and owners and investors include Stan Kroenke, Robert Kraft, Peter Guber, Joe Lacob and other traditional sports team owners.

UC Irvine in Orange County opened the UCI Esports Arenaa 3,500-square-foot facility in 2016—the first of its kind at a public university—and actively recruited players with scholarships.  Major television and digital platforms have struck multi-million-dollar broadcasting deals. (For a sense of scale, West-L.A. based Riot Games, League of Legends’ developer, signed a seven-year, $300 million dollar deal last year with BAMTech, the streaming technology arm of Major League Baseball.) Heck, the 2024 Paris Olympic Committee is even considering adding e-sports to the Summer Games, according to ESPN.

Like other creative content providers that have expanded their business model and presence in the L.A. market—Amazon, Netflix and Hulu among them—gaming ventures are drawn to the area because of the talent base and concentration of entertainment studios and facilities, he said. “It goes along with everything else that you see in content creation and all sorts of digital media content that is being produced in Los Angeles,” Nusbaum said.

The gaming companies located in Los Angeles are not necessarily price sensitive, but are making business decisions in which they are prioritizing proximity to talent over real estate costs, Kevin Carroll, a research analyst at JLL, said.  This drive toward talent contributes to the high density of gaming companies in areas where tech and media employees are located on the Westside in Santa Monica, Culver City, Playa Vista and Venice, which consequently are some of the most expensive markets in Los Angeles. (Office rents in West L.A. averaged $4.61 per square foot at the end of 2017, according to research from Colliers International.)

Additionally, Downtown and Pasadena are also home to a cluster of gaming companies.  Gunslinger and WhiteMoon Dreams moved to Pasadena in 2016 and 2017 respectively, while Magnopus made the move Downtown in 2014, with Section Studios following a year later.

“This speaks to the demographic of those markets, and access to a young, educated work force. We continue to see a clustering of gaming companies around larger, more established tech firms as an effort to draft off of their success,” Carroll said.

And CBRE predicts the growth of e-sports will continue to fuel investments in the sector by game studios. Industry growth is also expected to spread into ancillary businesses including training facilities and broadcast studios and add to the demand for these hard-to-get commercial spaces in Los Angeles, especially in key markets, Nusbaum said. These include Burbank, which has become an epicenter of e-sports because of the Blizzard Arena, the suburban city of El Segundo and the West LA markets, including Culver City and Playa Vista.

“We are at the beginning of this industry. It’s an emerging trend and something our clients and brokers should be looking out for in 2018,” he said.

Source: commercial

Snap Inc. Retreating in Venice by Putting 163K SF on the Sublease Market

Snap Inc., the parent company of disappearing messaging app Snapchat, has relinquished 14 of its prime Venice Beach office locations, amounting to a total of 163,000 square feet, for sublease. The organization is consolidating those offices into a central location in nearby Santa Monica, according to CoStar Group.

The 14 Venice locations represent more than half the space Snap occupies in the city. Those properties range from 2,800 square feet in a historic building on hip shopping and dining street Abbot Kinney Boulevard to 44,887 square feet in a low-rise glass building known as Thornton Lofts at 619-701 Ocean Front Walk on the Venice Boardwalk. The terms range from two years to six years, with rents between $4 and $11 per square foot, CoStar reports.

Snap’s move to depart Venice comes in the wake of protests by Venice residents who feel Snap’s presence has fundamentally changed the artsy and alternative vibe—think the East Village in New York City before its gentrification—according to Curbed. In response to protests, Snap announced in March that the company would “[concentrate] our future growth outside of Venice, Curbed noted in another piece.

Snap has tapped Los Angeles-based Industry Partners and JLL to handle the sublease. Representatives at JLL declined to comment while those for Industry Partners and Snap Inc. did not respond as of press time.

Founded in Venice in 2010, Snap is retaining the offices of Chief Executive and Co-Founder Evan Spiegel, a 6,000-square-foot building at 63 Market Street. Since its inception, Snap has preferred to lease or buy a number of small buildings in the area rather than have an official centralized headquarters. However, that strategy appears to be changing.

Valued at $3 billion when Snap went public last February, indicated that the disperse nature of its locations was a rising concern, stating in its filing with the Securities and Exchange Commission: “…because our office buildings are dispersed throughout the area, we may be unable to adequately oversee employees and business functions. If we cannot compensate for these and other issues caused by this geographically dispersed office structure, we may lose employees, which could seriously harm our business.”

Last year the company went public and bet big—leasing more than 300,000 square feet of office space at the Blackstone Group’s Santa Monica Business Park in what is believed to be the largest commercial real estate transaction the tech company has made to date. Financial terms of the lease were not available, but Blackstone was asking $4.65 to $4.95 per square foot at the park, according to CoStar.

That deal came after Snap signed a six-year lease in September 2016 to take over 79,000 square feet of office and hangar space at Santa Monica Airport, as the Los Angeles Times reported. A spokeswoman for Blackstone declined to comment.

Source: commercial

Breast Cancer Research Foundation Moving HQ to Club Row Building

The Breast Cancer Research Foundation (BCRF) is moving its Manhattan headquarters to the Club Row Building at 28 West 44th Street in Midtown, where it has agreed to sublease 13,114 square feet of office space, Commercial Observer has learned.

The nonprofit signed a five-year sublease to take part of the sixth floor at the 22-story, 372,000-square-foot property between Fifth Avenue and Avenue of the Americas, according to sources with knowledge of the transaction. BCRF is taking over the space at the APF Properties-owned building from advertising software provider Mediaocean, the sublandlord in the deal.

The move will see BCRF nearly double its current footprint at 60 East 56th Street between Park and Madison Avenues, sources said. The organization is expected to relocate to its new offices at the Club Row Building before the end of March.

Asking rent in the deal was in the high $50s per square foot. Sam Seiler and Sinclair Li of CBRE represented BCRF in the transaction, while Kirill Azovtsev, Michael Pallas and Jim Wenk of JLL represented Mediaocean. A spokeswoman for CBRE declined to comment, while a spokesman for JLL did not immediately return a request for comment.

Other tenants at 28 West 44th Street include the City University of New York, the American National Standards Institute and film post-production studio Crew Cuts.

APF Properties partnered with PGIM Real Estate to acquire the building from SL Green Realty Corp. for $161 million in 2011. APF subsequently bought out PGIM’s stake to gain full ownership of the property in 2014.

Source: commercial