A duo of new lease deals has pushed a gleaming Santa Monica office complex once featured in Architectural Digest toward full occupancy in a show of how top-tier properties are standing out even as Los Angeles leasing demand trails the rest of the nation.
Medical apparel maker Figs and women's supplement company OPositiv Health have signed expansion deals at 2834 Colorado Ave., part of Santa Monica Gateway, a two-building complex owned by developer Jack Walter and managed by Lincoln Property Co. The complex is now about 90% occupied.
That makes the properties stand out in Santa Monica, a city with a 20% office vacancy rate that has struggled to rebound after the pandemic affected foot traffic from workers and tourists alike. That figure compares to a 16% vacancy rate for the greater Los Angeles office market, which in turn is underperforming the country's vacancy rate of 14%, according to CoStar data.
While office demand is improving nationwide, leasing is increasingly concentrated in modern, well-situated buildings rather than older, less competitive stock.
The same is happening in Santa Monica, where amenity-rich properties with high exposed ceilings, expansive curtain-wall glass and efficient rectangular floor plates like the properties at Santa Monica Gateway continue to resonate with expanding tenants, according to Kent Handleman, who handles leasing for the property.
“It’s a classic case of flight to quality,” Handleman, executive vice president at Lincoln Property Co., told CoStar News. “Build a good modern building in the right location, listen to what tenants want, and you get it leased.”
Among LA's top deals
Figs, the direct-to-consumer retailer of stylish medical apparel, has doubled down on its commitment to the property.
The company moved into Santa Monica Gateway in 2019 and just struck a deal to expand from its 26,000-square-foot space into 39,620 square feet, taking over a full floor previously occupied by Goop, the lifestyle retailer and restaurant group owned by Gwyneth Paltrow.
Goop’s former full floor featured contemporary interiors that resonated with Figs, brokers note. Goop, after being in the property since 2018, has relocated to Colorado Center, a nearby campus with an indoor swimming pool and basketball court.
At the same time, OPositiv Health has relocated from a separate office around the corner into roughly 26,000 square feet at 2834 Colorado, keeping the project close to full occupancy.
The women’s health company, which sells supplements direct to consumers and through retailers like Walmart, relocated from a smaller nearby building, allowing employees to remain in the same neighborhood with minimal disruption.
The leases are some of the biggest to be signed in Santa Monica in the past year, according to CoStar data.
Located in Santa Monica’s media district roughly 27 blocks from the ocean, Santa Monica Gateway sits apart from the challenges often associated with downtown Santa Monica, Handleman said. The area includes other prominent office complexes such as Water Garden and Colorado Center and is viewed as more insulated from homelessness concerns tied to transit hubs, he said.
Tenants gain clarity
The deals land during a challenging period for the Los Angeles office market, where tenants have vacated about 1.9 million more square feet than they have leased over the past year, according to CoStar data.
On a national basis, office tenants are committing to more space than they're giving up for the first time since 2019. Still, that market remains bifurcated as tenants' preference for space in the newest and nicest properties continues to widen the gap between options at the premium end of the office quality spectrum and their less-desirable counterparts.
After several years of short-term renewals and space uncertainty, companies now have greater clarity on how much room they need and are acting on it, Handleman said.
Many of the recent commitments would have been harder to secure in 2022 or 2023, when companies were unsure of their in-office plans and how much space they needed, Handleman added. Today, he said, most firms are operating at least four days a week in person, giving executives confidence to sign longer-term leases.
“Tenants didn’t know what their needs were coming out of COVID,” Handleman said. “Now they do, and you’re seeing them act on it.”
Santa Monica Gateway is the kind of property that's in demand from innovative or trendy companies, Handleman said.
The two-property campus was completed about a decade ago with creative tenants in mind; it has evolved into a home for consumer-facing firms including gaming firm PlayQ and healthy snack maker Legendary Foods. The neighboring 60,000-square-foot building is fully occupied by Starz Network.
Many of the founders of these tenants live within an easy commute of the property, Handleman said.
With about 20,000 square feet of built-out space remaining, Lincoln is targeting tenants that value efficient floor plates and turnkey interiors, Handleman said.
For the record
Lincoln Property Co.'s Kent Handleman represented the landlord in the deals. Zacuto Group's Andrew Sinasohn represented OPositiv Health in the deal.