The Red Building, an ultra-modern office structure, has won praise for its design while struggling with a high vacancy rate since opening five years ago at the 1.2 million-square-foot Pacific Design Center in West Hollywood, California. Now it's gaining some traction with tenants, especially a big one: WeWork.
WeWork, the shared-workspace provider, leased an additional 39,000 square feet at the Red Building, which had a vacancy rate of as high as 80 percent for several years. It brings the company to a total of roughly 163,000 square feet at the Pacific Design Center, developer Charles Cohen's office and showcase complex focused on home furnishings and creative media where dating app Grindr and financial tech firm InvestCloud are among the tenants.
With the new lease, WeWork plans to occupy the building's 11th floor. It already occupies 70,000 square feet across the entire seventh and eighth floors in the Red Building.
WeWork also leases 54,630 square feet on the seventh floor at the Green Building in Pacific Design Center, according to CoStar.
The Red Building, designed by architect Caesar Pelli, makes up more than two-thirds of the total office space added in West Hollywood since 2013, with smaller buildings opening in 2016 and last year, CoStar data shows. After completing construction, Cohen sought largely marquee creative firms to lease space in his building that had asking rates above market for several years in part reflecting the positive attention drawn by its design. His firm went through a number of external and internal brokers to try to lease up the space.
WeWork, founded in 2010, has grown to become one of the largest shared office space providers in the world by largely focusing on leasing space directly from a landlord, building it out with modern office amenities and then subleasing desks or suites to businesses on flexible terms. It operates roughly 20 sites in Los Angeles.
At the Red Building, WeWork has signed a sublease deal to provide office space for director and producer Ron Howard’s Imagine Entertainment to establish a creative incubator for movie and television projects known as Imagine Impact. The incubator is operated by a part of the company headed by Howard and fellow producer Brian Grazer.
A24, an indie film and TV production firm behind the Academy Award-winning film "Moonlight," recently leased 22,000 square feet on the 12th floor of the Red Building, where it plans to move from a small 1950s-vintage office building just more than a mile away, according to reports.
Cohen operates Cohen Design Centers and Cohen Brothers Realty Corp. that own and manage more than 12 million square feet of office and showroom space in Manhattan, Los Angeles, Houston and Florida.
The first building in the Pacific Design Center was the ubiquitous Blue Building, a 750,000-square-foot showroom also designed by Pelli and built in 1975. A Cohen investment group in 1999 acquired the property, known affectionately for years as the Blue Whale by locals, in a distress sale from Teachers Insurance and Annuity Association of America. Cohen developed the Red Building on the property.
The West Hollywood vacancy rate for newer office property, which stood at almost 17.4 percent last year, has fallen well below 12 percent, lower than the broader Los Angeles market's 13.4 percent vacancy rate for newer 4- and 5-Star buildings, according to CoStar.