City of Los Angeles Mulls Signing Lease for More Than 295,000 Square Feet
The 50-story Gas Company tower, middle, is located at 555 W. 5th St. in downtown Los Angeles. The building fell into receivership earlier this year. (CoStar)
By Jack Witthaus
CoStar News
June 15, 2023 | 5:11 P.M.
One of the biggest office leases signed so far this year in Los Angeles may occur in one of the city's hardest-hit markets in a building that's in receivership.
The city of Los Angeles is considering inking a deal to move five departments into roughly 297,500 square feet at 555 W. 5th St. at the Gas Company Tower, according to city documents. The building fell into receivership earlier this year after Brookfield DTLA, a downtown office fund partially owned by Canadian real estate giant Brookfield, failed to make loan payments. The building contains 1.3 million square feet of office space.
Brookfield DTLA handed the building over to receiver Gregg Williams, principal receiver of Trident Pacific, a receivership firm in Newport Beach, California. The building was roughly 27% vacant when it was handed over to Williams.
The five departments may move into the space as soon as February 2024, according to city documents. The 15-year deal has an option to extend the lease for another five years.
The city is considering moving its departments of housing development, economic and workforce development, office of finance, community investment for families and youth development.
These departments currently occupy roughly 228,500 square feet at 1200 W. 7th St.
Million-Dollar Rent
The city is expected to pay a monthly rent of roughly $1 million for the space, or about $40.80 per square foot on an annual basis, according to city documents. This rate includes utilities, custodial, security and maintenance and doesn't allow the city to have to pay for "inflationary increases in operating expenses and property taxes throughout the term."
Meanwhile, the city secured $210 per square foot for tenant improvement, according to city documents. Any leftover tenant improvement allowance can be applied to the city's rent. In addition, the city has a right to lease up to 893 parking passes both on and off site.
The city's General Services Department needs the approval of the city council and mayor to negotiate and execute the lease with Williams. L.A.'s city council is expected to take up a motion related to the lease on Friday, according to a city agenda. Representatives in the deal didn't respond to emailed requests to comment from CoStar News.
Office leasing has been abysmal in the greater Los Angeles this year as remote work, working from home and economic uncertainty have cooled tenant demand. There have been only two office leases signed in Los Angeles County this year exceeding 100,000 square feet, according to CoStar data. Around a dozen of these leases were signed in the entire year of 2022.
Sony Pictures Animation signed a lease for roughly 246,000 square feet in February at 5750 Wilshire Blvd., which is the largest office lease inked in greater L.A. so far this year.
For the Record
CBRE's Onno Zwaneveld is representing the tenant in the deal and Colliers' Sean Fulp, Matt Heyn and Ian Gilbert are representing the building.