Business renters turn buyers

With office space prices bottomed out, downtown tenants with means are snapping up their buildings

- BY ROGER VINCENT

Photographs by ROBERT GAUTHIER Los Angeles Times THE CITY of Los Angeles plans to buy a 35-story tower downtown at 865 S. Figueroa St. for use by the Department of Water and Power.

As the office market bottoms out after a long fall, renters are swooping in to buy their own buildings.

Occupant businesses are seizing the opportunity to become owners, especially in downtown Los Angeles, where glittering high-rises have plummeted in value since occupancy dropped during the pandemic. It has never fully recovered, but investors believe the market has at least stabilized.

Among the latest to snag a skyscraper is fund manager Capital Group, which has agreed to pay about $210 million for the 55-story Bank of America Plaza atop Bunker Hill, where it has offices. Others choosing to buy over rent include Riot Games and the Los Angeles Department of Water and Power.

"We knew the best landlord we could possibly have would be ourselves," Capital Group Chief Executive Mike Gitlin said.

There are some good reasons tenants want to become landlords right now, Newmark property broker Kevin Shannon said, starting with timing.

"Everyone knows we're near the bottom of this cycle, and it’s always good to buy near the bottom," he said.

Downtown has suffered from an oversupply of office space since a building spree in the 1980s and early 1990s.

The lack of rent-paying tenants that has driven down office values has become more acute since the pandemic. Nearly 40% of the office space in the financial district was available at the end of last year, according to CBRE. Overall vacancy downtown has climbed from 14% in 2019 to 34%.