Two major sales, including Silverstein Properties’ purchase of the US Bank Tower for $430 million, closed in the third quarter.
Investment activity in Downtown Los Angeles in the third quarter could indicate the initial signs of recovery. Two major deals closed in the third quarter, most notably Silverstein Properties’ purchase of the US Bank Tower for $430 million. In addition, two new projects broke ground in the third quarter and an additional eight new projects are ongoing in the construction pipeline.
“In Q2, the market was understandably paralyzed by uncertainty, which was clearly reflected in our Q2 DTLA Market Report,” Nick Griffin, executive director of the Downtown Center Business Improvement District, tells GlobeSt.com. “By Q3, however, and despite the pandemic constraining leasing and other economic activity, there was growing recognition that we were not looking at collapse, and that while there will certainly be changes in the market, the fundamental appeal of the city center is still strong, and Downtown is still a solid market and good investment. This perspective was already evident in Q2, with many of the biggest players amassing capital for opportunistic investments, on the assumption that short-term disruption would not change the long-term outlook. And now we’re seeing that capital being deployed.”
While the submarket has not yet recovered to pre-pandemic levels of activity, Griffin believes the third quarter performance is the beginning of the recovery for Downtown Los Angeles. “One thing history has shown us time and again, is that cities—particularly top tier cities—rebound rapidly and robustly from crises. In fact, they usually “build back better,” to borrow the current phrase,” he says. “This reasoning is driven by two factors: first, is that their appeal is not a market trend—it is grounded in the most basic human qualities—the desire to connect, socialize, share ideas, be immersed in cultural experiences, and conduct commerce. These things can be done virtually, sure. But do you want to? Exclusively? Of course not.”
The DCBID has focused on building a strong and diverse culture in Downtown Los Angeles, and ultimately, Griffin says this “ecosystem” will help the market adapt and evolve. “When crises strike and circumstances change, cities shift, and there is often great opportunity in those situations,” says Griffin. “Players who have been around for a while – through multiple crises—know this firsthand. They’ve seen this show before and they know how it plays out. And they are ready to not just take advantage of it but be a part of making it happen.”
The massive Silverstein deal is a perfect example of the agility of the market to embrace change, according to Griffin. While the office market has been among the hardest hit asset classes during the pandemic, it was an office deal that jumpstarted investment activity. “Crisis causes disruption and expedites OUE’s plans to exit the US Bank investment,” says Griffin. “The buyer, Silverstein—who, let’s remember, was on the front lines of the 9/11 crisis and rebuilding of Ground Zero—is poised to seize the opportunity to enter a market they were already eyeing with the acquisition of one of DTLA’s trophy properties. Because of the circumstances, that opportunity comes with a lower basis price, providing them with more flexibility to adapt to evolving market conditions.”
Source: Globe St.