LA tech companies are moving out of Silicon Beach — here's why

by Hannah Levy
November 6, 2018
Silicon Beach is moving east
photo via shutterstock

After more than a decade of beachside prominence, LA tech juggernauts Snapchat, Google, Apple and Amazon are making their way east.

The companies are settling into the guts of the city, where space is (marginally) more abundant and rent prices soar (marginally) less close to the sun. And, for context, we’re talking baby steps here — five or ten mile micro-migrations to neighborhoods like Fox Hills, Mar Vista and Sawtelle.  

Never underestimate the weather and the beach; it’s a very SoCal specific amenity that employers can offer to their workers like nearly no other region can."

The question is: If Google and Apple are moving, just how expensive is Silicon Beach — and what awaits the companies that are choosing to leave?

 

Growth is a beach — for rent prices, at least

CBRE’s recently-released Tech-30 report tells the story of LA tech in market prices and migration patterns. One major takeaway: As the city’s tech industry grows, so does the cost of office space.

According to the brokerage firm’s report — which surveyed office rents in the top 30 tech markets across the U.S. and Canada — LA’s tech scene ranks second in overall market growth, with around 1.3 million square feet of space rented in the last five years.

LA’s immense popularity today with tech employers is closely related to the emphasis on content creation.”

And that makes sense as tech employment grows. Between 2016 and 2017, the number of tech employees working in the city increased by just less than 15 percent. At the same time, rent prices across the city have jumped by nearly 16 percent.

“Never underestimate the weather and the beach; it’s a very SoCal specific amenity that employers can offer to their workers like nearly no other region can; and today is all about amenities and experiences,” CBRE Vice President Chris Penrose in a statement.

 

Small or large, sand and sun comes with a price tag

Beach weather in particular comes with a steep price tag. In sunny Santa Monica, rent premiums have risen by 78 percent since 2011. To handle that hike, many companies have taken up co-working spaces or converted retail locations into office space. But vacancy is tight and getting there first is tricky.

If you’re thinking that the answer is obvious: just pick another beach— think again. Rent in Playa del Rey and other coastal communities neighboring Santa Monica and Venice sits at around $100 per square foot.

If wallets could talk, they’d call that a sunburn.   

 

Transit and talent — what’s drawing companies inland

If you're being priced out of the beach, but want to stick it out in the city of angels, there's only one direction to go — east. From Culver City to Echo Park, Downtown LA to Hollywood, and even as far as Glendale, Burbank and Eagle Rock, companies are heading away from the water and into the city's landlocked core.

Here are a few reasons why that move pays off.

Most obviously, pricing. Office rents in LA’s interior — while still not cheap — offer more for less.

It's also a lifestyle choice. A lot of these neighborhoods boast reasonably built-out mass transit lines, a perk that’s hard to find in the city’s beach communities, and a more traditionally urban atmosphere.

Then, there's the entertainment industry. Studios need space, which is why some of the largest production houses and studios are based in Central and North LA. Along with the entertainment hubs themselves come the people those establishments attract and create: the talent.

And that talent is a major selling point, according to Penrose.

“LA’s immense popularity today with tech employers is closely related to the emphasis on content creation,” he said. “These companies require large amounts of space and employees to help produce an immense number of movies and shows, and the greater LA area, with all its high-quality talent and great office markets to choose from, can provide just that.”

Like the sands of time, things change. Rents go up. Companies move. Then those rents go up. They move again.

Such is life here in Los Angeles. Stay tuned for more. 

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