Trends in Tech Office Space: LA Edition

The Los Angeles metropolitan area is coming of age as a major technology center. Despite its reputation as a single-industry town, it has actually been home to industry-leading tech companies for decades. Much like Silicon Valley to the north, Los Angeles began attracting technology companies as a by-product of the rise of the defense industry in the 1950s.

Defense companies continue to play a role today: Northrop builds fighter jet aircraft components in El Segundo, and NASA’s Jet Propulsion Laboratory, located in Pasadena, continues to attract scientists and tourists from around the world. Of course this being L.A., the movie and entertainment industries have exerted their influence as well. Major motion picture studios such as The Walt Disney Company, Dreamworks and The Weinstein Company have pulled in special effects and animation startups.

“Culture and place are more important today than ever.”

In Los Angeles, where a technology company decides to locate plays a critical role in its ability to attract and retain top employees looking to maximize both job opportunities and quality of life. To shed light on some of the top trends in the increasingly heated Los Angeles real estate world, NewsCenter.io talked to Jeff Pion, the vice chairman of CBRE and a leading expert on southern California real estate. CBRE, which was founded in 1906, is the world’s largest commercial real estate brokerage and services firm, with 75,000 employees and more than 450 offices globally. Pion’s career at CBRE spans 33 years, and he has watched the evolution of L.A. real estate for several decades. We talked to him about the confluence of technology and recent real estate trends; his answers are lightly edited for brevity.

Jeff Pion, vice chairman of CBRE

NewCenter.io: What are the top trends for commercial real estate? Why are companies choosing Los Angeles as a destination?

Jeff Pion:  Culture and place are more important today than ever. In the technology sector in particular, hiring smart people is a company’s key competitive advantage. And office and culture are very important; ten years ago, the typical office was a sea of cubicles, whereas today it is perceived of as part of the benefits offered to employees.

In Los Angeles, one advantage is being part of the cluster near the beach cities. That area is close to seven leading educational institutions, and many emerging tech markets are focused around higher-learning institutions; the market is driven by proximity to intellectual capital.

L.A. is also unique because of the convergence of tech, media, entertainment and culture, music, fashion, art — there are a lot of things that happen in LA that may not happen to the same degree in other metropolitan areas. More tech companies are trying to figure out how to blend this environment with its advantages into their needs for people.

And of course there’s always the lure of great lifestyle, geography and weather. Los Angeles is hard to beat when it comes to the availability of recreational options for employees.

NC:  What do you tell companies who want to move to LA – what are your discussion points?

JP:  It comes down to location, the clustering that I was talking about, since L.A. is so spread out. Industries tend to move in near each other. The Westside is home to more tech companies than downtown or Pasadena.

And then you’ve got very young, emerging companies saying, “Where can I go to hire great people that I can afford?” Downtown may be a good option for those startups. El Segundo offers a convergence of the southern part of the Westside, because you have some of the talent already there.

NC:  WeWork and co-working spaces — what do they represent to the commercial office real estate market?

JP:  I view WeWork as both a disruptor and as synergistic for the real estate community. WeWork is solving a need for tech companies that don’t know what they’re going to look like a few years from now and need flexibility in the short term.

But landlords look for longer lease terms, for financing and other reasons, so WeWork has come in as a “bridge” between the two ends of the spectrum. I think they have found a niche, like Uber and Airbnb, where it is positive for both the tenant and the landlord because they’re filling that need.

NC:  Jason Fried, who wrote the book “Remote: Office Not Required,” mentioned that many more people are working from home, or remotely in general.  Do you see this as negatively impacting the real estate market. Is that a disruption you’re facing?

JP:  Good question. I don’t think it’s about working remotely; it’s about working everywhere. There’s a big difference. I think people like to be with other people, which is why these co-working companies have become so popular: They fill a need for people to be around others. Now, it’s about choice: Where do you want to do that work?

Santa Monica beach

NC:  How are L.A. commercial real estate rates compared to other markets – say, Silicon Valley, San Francisco or other tech cities? Are rates comparable?

JP:  I think they’re all over the map. We do a global rent study — our Tech 30 Report — where we survey the top technology markets in the U.S. from the perspective of commercial rents. Rents are different in all the various markets, and we’ve seen increases in the past few years across the board. Rent used to be one of the top three items in decisions about location; today, human capital is the primary driver for the decision process. That will continue to be a driver, as companies understand that the biggest key to their success is the attraction and retention of talented people.

NC:  You’ve seen many trends in company office space layouts. When you walk into a new facility for a tech company today, how does the workplace look different versus — say, five years ago?

JP:  First, branding has become more important: What is the brand as soon as you walk into the front door? Tech companies want to communicate their branding cues as a first impression.

Second, every individual works differently now – it’s no longer a one-size-fits-all game. There’s a great book, “Quiet: The Power of Introverts in a World That Can’t Stop Talking.” The most flexible layouts are about having enough choices so people who work differently can have a place where they can work efficiently and creatively.

NC:  Do you notice other trends affecting where companies decide to locate?

JP:  A few years ago, the more successful technology companies wanted all of their amenities in-house. Cafeterias, hair salons, day care, auto care and so on. In the last few years, there’s been a transition where, for example, some companies have moved from Silicon Valley to San Francisco, and they’ve forgone the commissaries and other in-house services to encourage their people to engage with surrounding communities. As part of that trend, we’re seeing more skyscrapers and other high density locations that concentrate a large number of people in one place. They are changing their policies not from a cost-savings standpoint, but from a community-building perspective.

Jeff Pion is vice chairman of CBRE, the world’s largest commercial real estate brokerage and services firm, where he has worked for the last 33 years. He has been the #1 brokerage producer in the company’s Beverly Hills/Century City office for 17 of the last 22 years, and he was the youngest winner ever of the company’s William H. McCarthy award for professionalism, integrity and loyalty. He graduated with an honors degree in economics from the University of California, Santa Barbara, and he lives with his family in Pacific Palisades. http://www.cbre.us/people-and-offices/jeff-pion