Inside Downtown's Emerging Tech Boom

By Eddie Kim | Downtown News

DOWNTOWN LOS ANGELES — When it comes to high technology in Los Angeles, the location of choice is “Silicon Beach.” The label describes the thriving scene in Santa Monica, Venice and adjacent neighborhoods that is home to the local offices of Google, Snapchat, Hulu and many smaller companies.

At the same time, and with far less flash, Downtown Los Angeles is emerging as a destination for some tech companies. While the Central City is not yet a rival to the Westside, certain startups are finding a ripe atmosphere in a supportive, creative community. In other instances, established firms like the ability to grow with the neighborhood.

There are numerous reasons for this, say tech industry and real estate players. The Central City has cheaper office space than on the Westside, and the offerings are growing as developers build more “creative” office space, with open floor plans rather than traditional corner offices and cubicles (see sidebar below). Others point out that Downtown’s growing roster of restaurants, bars and entertainment spots makes it more urban and flat-out hipper than the more venerable hubs, which is important for an industry with a hefty concentration of young workers.

Downtown’s greatest tech strength is in e-commerce, thanks to the proximity of the Fashion District and its network of manufacturing and distribution centers. Online fashion retailer Nasty Gal last year expanded into a larger space in its home of the PacMutual Building near Pershing Square. Other web-centric retailers to set up in Downtown include Hautelook, StyleSaint, GoJane, Ella Moss and Splendid.

Additionally, more than 35 tech startups call Downtown home, according to startup mapping site Represent L.A., with brands ranging from the customer service app maker Showkit to online truck parts shop Findit Parts to teleconferencing company Oblong Industries.

S. Ryan Meyer, regional director of tech education company General Assembly, has closely watched the area’s growing tech environment.The company, which has locations in 14 cities around the world, is expanding from Santa Monica into new digs at shared-office space Maker City, near Broadway and Washington Boulevard (in the complex formerly known as the L.A. Mart). They are also nearing a deal for a permanent office in the Arts District.

“There’s a lot of innovation Downtown in the tech sector, and as an educational startup, being closer and more accessible to a majority of people in the city was important,” Meyer said.

Startup Ecosystem

One man with a bird’s-eye view of the local tech scene is Peter Marx, a longtime Qualcomm executive who Mayor Eric Garcetti hired to be the city’s first Chief Innovation Technology Officer. His duties include improving tech infrastructure across Los Angeles and tracking tech sector growth.

When it comes to the latter category, he said, the city is performing “beyond everyone’s expectations.” Marx added that he has noticed an eastward trend in tech talent, and even traditional companies like real estate giant CBRE are choosing high-tech offices in Downtown.

“Downtown is a completely different place than when I was growing up,” he said. “You have public transit, you have bike lanes, you have nightlife. It has all the characteristics of what a hip, contemporary digital crowd would want.” 

Marx is not alone in pointing to the cultural shift in the community. 

Jeff Ellermeyer founded the production company Buck, which specializes in motion graphics, usually in ads, in 2003. Three years later he moved the growing company from Koreatown to office space on the fourth floor of a building at 515 W. Seventh St., above where Mas Malo and the whiskey bar Seven Grand sit today. Ellermeyer has 30 employees in his Downtown office and calls coming to the community the “best decision I’ve made.” 

“Production likes to be cool, and one thing I’m noticing now is — this is important for advertising — when clients come and participate in production, they used to want to be at the beach,” Ellermeyer said. “But a lot of clients want to stay Downtown now instead. There’s a tipping point for attracting creatives.”

Anthony Kelani, the co-founder and CEO of startup app company Showkit, saw a similar hip factor before deciding to move to the Spring Arts Tower after “graduating” from a West Hollywood incubator. He has five employees and plans to expand the office soon. 

“Everybody kind of congregates on the Westside and a lot of mixers and networking events take place there,” he said. “But you’re starting to see those things in Downtown, too. I think the whole startup ecosystem is growing up right now.”  

The hip factor is complemented by cost concerns. Scott Steuber, a broker with Avison Young, who has experience in both West L.A. and Downtown, said that a number of companies are getting priced out of Silicon Beach and are winding up in “peripheral” markets such as Downtown.

Rents could be $7-$8 per square foot per month in certain neighborhoods in Venice, he said. It can cost $5-$6 in Santa Monica and $3-$4 in Playa Vista. Meanwhile, rents in Downtown are closer to $2.50-$3 per square foot, he said.

Steuber doesn’t yet see a full-on migration of tech companies into the Central City, but he noted there are more office options for innovative brands than ever before.

Other companies are choosing to expand in Downtown. NationBuilder, a digital organizing platform company founded in 2009 by longtime Central City resident Jim Gilliam, is moving from the Pershing Square Building into bigger headquarters in the Biltmore Hotel. Gilliam saidhe resisted pressure to relocate his company, which now has about 150 employees, to West L.A.

Part of the reason for staying, he said, was to avoid being in a “bubble.” The Downtown location, he added, allows NationBuilder to integrate with the neighborhood in a meaningful way.

“D.C., Silicon Valley, the Westside — they all have their own dominant culture that’s toxic in its own way,” Gilliam said. “I wanted to be in a community where people were trying to build new from something old. Downtown really represented that to me.” 

Ani Okkasian, director of member experience at Hub L.A., an Arts District incubator that specializes in companies with social entrepreneurship elements and has more than 30 locations around the world, echoed the point.

“A couple years ago, the Arts District wasn’t as desirable. Now, people are coming in and newer businesses are re-establishing neighborhoods,” she said. “It felt like a neighborhood where we could ask, ‘Can we change it through good business?’”

Hunting a Juggernaut

No one pretends that Downtown is a direct competitor to Silicon Beach. Instead, say experts, its rivals for attracting businesses are smaller communities such as Culver City.

One issue, Steuber said, is that much of the top engineering and programming talent is concentrated in West L.A., and executives from national companies continue to be attracted to living on the coastline. Moving Downtown into the tech big-time, he said, may require persuading a juggernaut company to set up in Downtown.

That’s easier said than done, of course. Most recently, Yahoo, which real estate players say toured Downtown, rejected the area in favor of Plaza Vista, which is also where Google just bought 12 acres of land.

Still, Christopher Rising sees big tech potential in Downtown. He and his father, real estate veteran Nelson Rising, founded the company Rising Realty Partners in 2012. Their first project was turning the faded PacMutual Building into a modern creative office complex. It is now more than 90% occupied, with tech tenants including Nasty Gal and movie effects firm Magnopus. 

In Rising’s long view, Downtown has more breathing room for companies and their talent. Santa Monica and Venice are low on space and are getting more expensive to live in, he said, and potential office and residential projects have been “shut down” by the community. 

“When these kids get older and start building families, they’ll run into a huge housing imbalance,” he said. 

Meanwhile, Rising said, younger people are attracted to Downtown’s “24-hour experience,” which he compared to the scenes in San Francisco and New York’s SoHo area. 

Marx has high hopes that the burgeoning Downtown tech trend will continue to grow. The Central City’s emergence, he said, reminds him of an aged San Francisco warehouse, next to a vein of railroad tracks, that software giantAdobe converted into its huge headquarters.

“It was when Giants Stadium was being built, the Embarcadero was growing, and they’re still there and thriving,” Marx remarked. “We’ll have our own examples, in a very L.A. way, where Downtown and its beautiful buildings and communities stay hip and rejuvenated as a center for technology.” 

The Creative Push

Many Downtown law, banking and insurance firms have traditional office layouts, with executives in window suites and assistants relegated to interior cubicles. Amid the emerging tech boom, however, Downtown landlords are trying to lure innovative tenants by offering collaborative floor plans and modern tech infrastructure.

It seems to be working.

The New York-based We Work, which offers shared office space for entrepreneurs in creative and tech industries, recently announced it is leasing six floors (44,500 square feet) of the Fine Arts Building at 811 W. Seventh St. There’s a similar arrangement at Maker City L.A., near Broadway and Washington Boulevard, and newcomer Blankspaces in the Historic Core. 

The L.A. Cleantech Incubator also offers office space and support services to startups, as does its neighbor Hub L.A., which specializes in companies with social entrepreneurship elements. 

If office space is being built in Downtown, it probably comes with the “creative” tag. The former Ford and Coca Cola factories in the Arts District are undergoing such a transformation. The Herald Examiner Building in South Park will also have creative office space as part of its renovation.

Rising Realty Partners’ Christopher Rising, who oversaw a renovation of the PacMutual Building into creative office space, notes that the shift in workspace design is affecting not just the tech and startup sectors, but “traditional” occupations like law and finance, too. 

“What’s interesting is that the term ‘creative’ isn’t going to mean a lot in the future,” Rising said. “A 32-year-old lawyer trying to start their own business is going to want open offices, too. I don’t see us going back to the time of 10-by-10 offices with all your files in cabinets. We don’t have horse-and-buggies anymore, either.” 

Source: Downtown News