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Wall Street Journal: Adidas Signs DTLA’s Biggest Office Lease in More Than a Year

by Peter Grant, The Wall Street Journal • January 11, 2022, 8:00am ET


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Adidas AG agreed to a major new office lease in downtown Los Angeles, a sign that recent redevelopment in this market is starting to attract major office tenants even during the pandemic.

The German athletic shoe and clothing maker has leased 107,000 square feet in a new Brookfield Asset Management redevelopment, the developer said. The deal — a major expansion of Adidas's Los Angeles operation for marketing, sales and design — is the largest lease signed in downtown Los Angeles in more than one year, according to Brookfield.

Brookfield in 2017 purchased a controlling stake in the 2.5 million-square-foot complex, known as California Market Center, in a deal that valued the property at $440 million according to people familiar with the matter. It was a fashion-industry hub at the time. The developer has since spent about $250 million to consolidate those firms in one of its three buildings and redesign the remaining space for a range of office tenants.

Adidas, which now has only a small office in downtown Los Angeles, will initially occupy the top floors of two of the interconnected buildings. The company was attracted to the property in part because of its proximity to the new hotels, apartments, restaurants and cultural attractions that have mushroomed nearby, said John Barganski, a Brookfield senior vice president.

It didn't hurt that the location was also close to the Crypto.com Arena sports complex, formerly known as the Staples Center, where the Los Angeles Lakers, Clippers and Sparks play professional basketball and the Kings play hockey. "In our marketing material we identified the number of steps it was from our place to Staples," said Mr. Barganski.

Like most U.S. markets, downtown Los Angeles has been slammed by the pandemic, with office vacancies among the highest in the U.S. The vacancy rate downtown rose to 19.6% in the third quarter of last year, compared with 15.7% one year earlier, according to the Downtown Center Business Improvement District.

The broader regional Los Angeles office market had a vacancy rate of 19.2% at the end of the third quarter higher than such cities as Chicago, New York, Boston and Washington D.C., according to commercial real estate services firm JLL. Los Angeles's vacancy rate was 13% at the end of 2019, JLL said.

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Downtown Los Angeles has long been a major office district for law firms, accounting firms and government agencies. But in recent decades much of the growth in the Los Angeles region has been in other markets, such as Santa Monica, West Los Angeles and Culver City.

Downtown became more competitive following the opening of the Staples Center and Walt Disney Concert Hall about two decades ago followed by apartment, hotel and retail development. The apartment occupancy rate was 93.6% at the end of the third quarter, up from 85.2% one year earlier, according to the Downtown Center Business Improvement District.

Despite the popularity of remote working, Mr. Barganski said Brookfield is betting that office space will continue to be the primary location where work takes place in the future.

"We know they'll be back," he said.

Write to Peter Grant at peter.grant@wsj.com

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