One of the nation's most expensive office markets is ushering in a new wave of smaller, more nimble private property owners as institutional investors and large national landlords cash out of Beverly Hills.
In the third-most expensive office sale in Los Angeles in the past year, New York City-based Tishman Speyer sold a 133,300-square-foot building for $90 million, or $675 per square foot. The buyer was a joint venture of West Hollywood mixed-use developer Faring and the hospitality entrepreneur behind enVision Hotels.
The deal, higher than the Beverly Hills average sale price of $631 per square foot and more than double what Tishman Speyer paid developer PGIM for the property in 2005, validates "our investment strategy" for the building, said Tishman Speyer senior managing director Paul Galiano in a statement. Offices in the United States are selling at an average price of $267 per square foot, according to CoStar data.
It's the second Beverly Hills office property that Tishman Speyer sold to a private company for a premium in 2024. Other big investors like DivcoWest, Invesco and Nuveen have sold office buildings in the neighborhood in recent months to private buyers, with some of those deals also marking premium sale prices as the national office market remains in a state of recovery from the pandemic.
Buyers in the area of late have included lifestyle brands, hotel operators and small private development firms with access to cheaper capital — and strategies beyond investing in upgrades to support higher rents — that could change the flavor of one of the city's most expensive office markets, real estate professionals say.
"They're buying into the cachet of Beverly Hills," said Ryan Patap, senior director of market analytics for Los Angeles at CoStar Group. "They're looking to raise the profile of their brands."
Across the country, some private buyers are unfazed by sinking valuations and steeper borrowing costs as they take advantage of limited competition to score deals, often at a discount, according to CoStar research. Private owners’ share of the U.S. office buying market has risen from about 55% in 2021 to more than 60% in 2023.
The recently traded building at 9242 Beverly Blvd. is occupied by a Mercedes-Benz service center on the ground floor and two real estate investment firms, with a 43% vacancy rate, reflecting tenant retrenchment across the Beverly Hills office market.
While it's not clear what the new owners have in store for the property, an upgrade to support charging higher rents or even mixed-use redevelopment would add to other office changes taking shape in and outside the city.
Tishman's trio
Tishman Speyer, with a portfolio that includes Rockefeller Center in New York City and the Mission Rock neighborhood underway in San Francisco, purchased three adjacent Beverly Hills office buildings at 345 N. Maple Drive, 407 N. Maple Drive and 9242 Beverly Blvd. in 2005.
The firm put the three properties on the market in 2023, as Beverly Hills was still recovering from the pandemic, high interest rates and entertainment industry turmoil. The area still counts a historically high 18.6% office vacancy rate, up from 16.5% a year ago, according to CoStar data.
In August, the founder of lifestyle brand Fashion Nova bought 407 N. Maple Drive for about $119 million. The company plans to revamp the building into its headquarters and an invitation-only social club “for creators, influencers, celebrities and VIP guests where the [Fashion Nova] brand’s inner circle can enjoy curated amenities and bespoke partnerships,” according to a statement, such as content and podcast studios, a gym and spa.
The purchase price marked a nearly 67% sales premium over the $70.7 million that Tishman Speyer paid for the building in 2005, according to CoStar data.
The remaining building still up for sale is the 230,000-square-foot Maple Plaza at 345 N. Maple Drive that Tishman Speyer paid over $100 million for in 2005. Tenants at the half-empty building include the movie production team behind the hit films “The Lincoln Lawyer” and “Crazy Rich Asians.”
The new owners of 9242 Beverly Blvd. count experience in mixed-use and hospitality real estate. Faring owns 21 properties — including office, residential and mixed-use sites — in West Hollywood spanning 1.8 million square feet, with three projects under construction, including a hotel and a mixed-use center with homes and stores. Joint venture partner and hospitality entrepreneur Frank Zarabi’s enVision Hotels has four hotels on the East Coast, according to the company's website.
Ready to sell
Tishman Speyer isn’t the only institutional investor offloading local properties to private investors in Beverly Hills.
In July, institutional investment manager Nuveen sold the 300,000-square-foot Wilshire Rodeo Plaza at 9536 Wilshire Blvd. at a premium to Tinder co-founder Justin Mateen and his brothers for $208 million, according to CoStar data. Nuveen paid $196 million for the property in 2006.
The new owners plan to change the property's name to One Rodeo and add luxury stores and a social club.
Not every institutional investor is selling at a profit. Some are eager to move on from vacant office properties that are dragging down balance sheets, leading to distress or discount deals, CoStar's Patap said.
Institutional investment manager DivcoWest sold the 94,000-square-foot 331 N. Maple Drive in October for $655 per square foot to a local apparel brand, Frame, to use as its new headquarters. Divco sold at a loss, having paid $873 per square foot for the property in 2018.
In December, Atlanta-based institutional investor Invesco sold 9300 Wilshire Blvd. for $29 million, or about $416 per square foot, to a private buying venture, according to property records. Invesco paid $60 million, or $848 per square foot, for the property in 2019.