City Council Approves Lease for 295,000 Square feet in the Gas Company Tower Downtown
The 50-story Gas Company Tower in downtown Los Angeles may soon welcome a large tenant. The building is one of two office towers downtown in receivership. (CoStar)
By Jack Witthaus
CoStar News
June 16, 2023 | 4:51 P.M.
Downtown Los Angeles is not all doom and gloom in a year when it's been one of the worst-performing office markets in the city.
Los Angeles City Council approved Friday the city leasing roughly 297,500 square feet at 555 W. 5th St. at the Gas Company Tower, according to meeting documents. The tower is in receivership after the building's owner, Brookfield DTLA, failed to make loan payments. Los Angeles Mayor Karen Bass also needs to approve the lease, which would be the largest signed this year in greater L.A.
The high-rise is one of two buildings in receivership in downtown L.A. The towers have symbolized problems that have hit some office markets around the country since the pandemic caused companies to rethink physical space needs because of employees working from home.
The roughly 1.3 million-square-foot Gas Company Tower was about 27% vacant when it went into receivership. The lease with the city, though, would boost the building's occupancy to around 95% and make it more marketable to sell. Courts appoint receivers to reposition distressed properties to sell later on behalf of creditors or prepare foreclosure for the real estate owned, or REO, arm of a creditor.
The city expects to move five departments 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. These departments currently occupy roughly 228,500 square feet at 1200 W. 7th St.
Landlords in downtown Los Angeles have been finding it difficult to lease office space as numerous factors cool tenant demand, including remote work, economic uncertainty and negative crime and cleanliness perceptions. The downtown L.A. office market has an 18.7% vacancy rate, bigger than the greater L.A. average of 15%, according to CoStar data. The market's average rent is $39.56 per square foot, below the greater L.A. average of $42.22 per square foot.
For the Record
CBRE's Onno Zwaneveld is representing the tenant in the deal. Colliers' Sean Fulp, Matt Heyn and Ian Gilbert are representing the building. Brookfield DTLA handed the building over to receiver Gregg Williams, principal receiver of Trident Pacific, a receivership firm in Newport Beach, California.