Despite some mid-year projections that office construction would slow in 2019 due to increasing construction costs, current real estate cycle uncertainty and zoning issues, Los Angeles area office construction projects continue to rise as part of a commercial construction boom not seen in LA since the roaring twenties. In this blog post, we’ll take a look at some of the factors responsible for this continued rise in LA area office construction projects.

An Increase in Office-Based Employment

At one point, it seemed like remote work would mean the end to in-office work. Companies would start leasing smaller office spaces to save money now that they had fewer in-house workers with more employees working from home. Co-work spaces -where independent freelance remote workers could congregate in an office setting, were all the rage.

But the paradigm has shifted in 2019. WeWork, a real estate business designed to reinvent office life for remote workers, entrepreneurs, and start-ups needing just enough space to legitimize themselves, has instead become one of 2019’s biggest industry failures.

More companies in sectors such as telemarketing, computer design, marketing, customer service call centers, and engineering want office space to accommodate more in-house employees.

This is also good news for office construction companies – especially those specializing in tenant improvement construction. The look and feel of the modern office has changed. Modern office construction effectively marries all types of work styles, needs, or preferences. Areas for project collaboration are interspersed with cubicles or offices allowing for a quieter or more private work environment. Loft-style meeting rooms enable a free exchange of ideas. Acting as the epicenter or anchor that other office design elements branch out from.

Tech Is Driving Much of This Growth

In 2019, tech companies accounted for at least 21 percent of major U.S. and Canadian office-leasing activity per real estate firm CBRE. That’s an 11 percent increase from the firm’s 2011 data.

Tech is definitely driving Los Angeles area commercial real estate these days. This is the sector’s largest share of office-leasing activity in 5 years. In 2014, the tech sector first outpaced business services such as accounting and consulting in office space leasing. Keep in mind, this isn’t just the Bay or Los Angeles areas – previous hotbeds of dot com and tech businesses. This is throughout all of North America. The enormous FANG companies – Facebook, Amazon, Apple, Netflix, and Google – are responsible for one-third of this tech industry office-leasing activity.

Much of this can be attributed to the fact that tech has outpaced all other industries in post-recession job growth. Business is also good for these companies thanks to an improved economy. These things translate to more tech workers and this sector driving a lot of this increased demand for office space and construction/tenant improvements.

Urban Areas Are More Popular

Downtown Los Angeles and other heavily populated or busy LA suburbs are in-demand locations for many companies; particularly those looking to appeal to the youngest and best talent available. This has historic buildings being repurposed and brought back to life through adaptive reuse renovations. It also has new from-the-ground-up office construction projects popping up everywhere.

Urban areas such as DTLA offer a multitude of advantages for companies looking for office space compared to more rural areas. Things like walkability and access to public transportation are important to younger workers. This has many companies trying to establish roots in desirable locations loaded with many amenities and entertainment options that appeal to millennial workers.

This is why office space in the mixed-use developments springing up throughout DTLA is in such high demand. These mixed-use developments combine office space with retail, entertainment, hospitality, and residential components for a Work, Live & Play spirit that plays well to both employers and employees.

Interested in Office Construction or Office Tenant Improvements in the Los Angeles Area?

These 2019 trends in office construction are likely to continue to influence new office builds, office tenant improvements, and retrofits to come in 2020. If you’re a tenant, landlord, or developer in need of office construction or tenant improvements in the Los Angeles area, contact us today to discuss your project and get a FREE project estimate.