LOS ANGELES

THE RISE OF SILICON BEACH

From offices to warehouses to downtown's revitalization, tech's impact is being felt across the real estate market

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Los Angeles has long been a world-class center for business, culture, travel and entertainment. However, the city has also matured into one of the nation’s leading high technology centers with a key part of it comprising the “Tech Coast,” a moniker given to the Southern California coastal region from Santa Barbara to San Diego, where there is a high concentration of technology-based enterprises. The Bureau of Labor Statistics estimates there are now more than 221,500 STEM (Science, Technology, Engineering and Mathematics) employees in Los Angeles County. Several industries have even formed clusters, most notably the software and electronics companies based in “Silicon Beach.”

PUSHING THE BOUNDARIES

As the real estate market and business landscape evolve, so does the definition of Silicon Beach, which once only referred to the confines of Santa Monica and Venice. The technology and creative companies that define Silicon Beach are now finding they have more options than ever if they want to stay in an amenity-rich market surrounded by like- minded companies and talent. As tenants’ leases expire, Santa Monica landlords will find themselves in greater competition with other submarkets like Playa Vista, Marina Del Rey, Culver City and even El Segundo and Downtown Los Angeles—especially for budget-conscious tenants.

GROWING TECH SCENE FOR REAL ESTATE

The Los Angeles tech scene is poised to gain global prominence in the coming years. In 2015, the Los Angeles/ Orange County region captured a greater share of total United States venture investment than it had in the last 20 years. In raw dollars, 2015 also saw the greatest amount of venture money invested in the region since 2000—fuel for high-growth technology companies to expand. At the same time, venture investment remains strong in Northern California. This is a good sign for Los Angeles, as historically, Silicon Valley companies like Facebook, Google and Yahoo! have opened locations in Los Angeles to access the highly educated workforce graduating from prominent schools such as the University of California Los Angeles (UCLA), University of Southern California, California Institute of Technology and Pepperdine University, among others.

IMPACT BEYOND THE OFFICE

Technology’s impact on the Los Angeles real estate market and economy extends far beyond the polished concrete floors and exposed ductwork of the office space housing tech firms. With increasing numbers of consumers turning to e-commerce, more consumer goods can be found in warehouses than in retail stores. According to unadjusted estimates from the U.S. Census Bureau, e-commerce sales remained strong in 2015, as web sales totaled $343.0bn for the year, a 14.9% increase over 2014’s $298.6bn. Total retail sales grew by only 1.6% over the same time period, to $4.7 trillion from $4.6 trillion, when factoring out food service sales and sales at restaurants and bars.

As the demand for warehouse space in the tightest industrial market in the country increases, warehouses are being built with larger footprints and higher clearance heights than ever before. In fact, at more than 500,000 sq ft, the average size of a new warehouse constructed in the Inland Empire, which houses many of the regional fulfillment centers serving Los Angeles, over the last five years is over 80% larger compared with five years ago. Many industrial occupiers are now conducting multiple operations under one roof, such as brick and mortar store inventory replenishment and online sales fulfillment.

LOS ANGELES IS EVOLVING

Los Angeles is continually evolving as a megapolis. The region’s growing population and traffic congestion is causing planning departments to work enthusiastically with developers to construct high-density, transit- oriented developments in an effort to transform growing communities into more efficient and engaging 24/7 “live, work, play” areas.

Residents are also seeing the resurgence of urban cores such as Downtown Los Angeles, which is experiencing a major boom in residential construction and population growth. Downtown’s revitalization also includes the restoration and repositioning of historic buildings and even neighborhoods through initiatives like “Bringing Back Broadway,” a ten-year plan to revitalize the historic Broadway corridor through economic development projects, business assistance and infrastructure improvements. 2016 even saw a train carry passengers from Downtown Los Angeles to Santa Monica along once-abandoned tracks for the first time in nearly 60 years—one of many public transportation investments intended to better connect Los Angeles’ many vibrant cultural and business centers. 

LOS ANGELES SCIENTIFIC, TECHNOLOGY, ENGINEERING AND MATHEMATICS (STEM) EMPLOYMENT BY EDUCATION

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