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Converted Aerospace Facilities in El Segundo Continue Attracting Investment

Atlas Capital Buys Former Raytheon Facility for $39M
August 7, 2018
A former Raytheon research facility turned creative office campus in Los Angeles’ South Bay has sold for $39 million in another sign that the area is an attractive alternative to Westside neighborhoods that carry the Silicon Beach moniker.

Downtown L.A. real estate investment and development firm Atlas Capital Group bought the 101,874-square-foot, two-building office campus, known as Insite, in El Segundo, CA from a joint venture of Forest City, CA-based real estate investment firm Steelwave and New York investment bank Goldman Sachs Group Inc. last month.

The joint venture had acquired defense contractor Raytheon's property, located at 2030 E. Maple Ave., in 2015 and overhauled the buildings into creative offices. In total acquisition and renovation costs, Steelwave and Goldman Sachs spent about $29.5 million on the property, according to Steelwave’s website.
See CoStar COMPS #3286687.

The renovations included adding a new façade, roof and landscaping among other upgrades. In the interior renovations, the partnership tried to maintain the “industrial feel” of the property while converting it to creative office space, according to brokers at Newmark Group Inc.’s NKF Capital Markets, who represented the seller.

The sales price, at around $383 per square foot, surpasses the El Segundo average of about $358 per square foot so far this year, according to CoStar data.

Once the center of Los Angeles' aerospace and defense industries, El Segundo has been transforming into a creative office hub in recent years. With many major contractors out of the market now and an office vacancy rate of 9.1 percent, the neighborhood has been positioned to capture spill-over demand from the popular Westside, often referred to as Silicon Beach, and areas to the north that include Playa Vista, Venice Beach and Santa Monica.

Sale prices are peaking and spaces are limited in those neighborhoods, leading the South Bay beachside cities like El Segundo, only a short drive south past the Los Angeles International Airport, to heat up as businesses seek nearby alternatives.

“El Segundo is now attracting capital and yield metrics that are comparable to the most desirable West Los Angeles submarkets,” said Kevin Shannon, co-head of the U.S. capital markets department at Newmark Knight Frank in El Segundo, who represented the seller, in a statement. “It is truly a lower Westside market.”

Investments have been on the rise in the last year in El Segundo. Annual sales volume hit an all-time high in the submarket in the second half of last year, according to CoStar Market Analytics. Among them, the Pacific Corporate Towers, a portfolio of three office properties, sold for $605 million, or about $381 per square foot, while Campus 2100, a four-building property, sold for $117 million, or $440 per square foot, last year.

Insite will be added to Atlas' portfolio of 49 properties comprising 8.6 million square feet across the U.S. that includes offices, shops, residences, hotels and industrial space, at the end of last year, according to its website. It also owns the popular Row DTLA shopping complex in downtown Los Angeles.

Please see CoStar COMPS #4470958 for additional information on this latest transaction.



Jacquelyn Ryan, Los Angeles Market Reporter  CoStar Group   
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