Struggling 30-Story LA Office Tower Becomes Massive Data Center – And Now Gets Twice The Rent Per Square Foot As New Office Space

The steel and glass giants that dominate Los Angeles' skyline look like they will stand forever, but they are becoming symbols of a bygone era when the best jobs were in office buildings downtown. Now, remote work is turning these towers into ghost towns. That explains why the 30-story One Wilshire tower has successfully reinvented itself as one of the largest data centers in the Western United States.

 In its heyday, One Wilshire Boulevard exemplified the modern office tower. Located just off the 110 freeway at the beginning of Los Angeles' iconic Wilshire Blvd., you could see the Hollywood sign from one side of the building and the California Coast from the other. There was a time when a company having prime office space on a higher floor in this building was a bona fide status symbol.

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 COVID-19 changed all that because when the Pandemic ended, millions of people who used to work in towers like One Wilshire simply didn't come back. This rapid change devastated the office sector of the commercial real estate market and the fallout is still being felt. With that said, the one constant in business is change and history has shown whoever adapts best to change survives, even if the necessary adaptation is a radical one.

When One Wilshire's marketability as a high-end office space collapsed and tenants began moving out in droves, its owners were suddenly faced with a dilemma. They had more space than they could rent on the office market and the cost of converting it to residential space was prohibitive. Fortunately for them, a new tenant base with an almost insatiable need for space was ready to fill the void.

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 The emergence of the data center is one of the most unexpected developments in the real estate sector. Data centers have become exponentially more important because they provide the digital infrastructure that AI and cloud services depend on to operate. Now that both technologies are ascending, data center construction is a priority for the entire tech sector.

 One of the newest and largest tenants at One Wilshire is data center operator CoreSight. Their Chief Revenue Officer, Maile Kaiser, told the LA Times, “We’re all consumers of data centers, whether scrolling social media on our smartphones, watching streaming services such as Netflix on TV or ordering a dog food delivery on our laptops. Any content that we make is stored in a data center.”

 In an interview with the LA Times, Darren Eades, who specializes in data centers for real estate brokerage JLL and represents One Wilshire, said, “Never in my career of 25 years in real estate have I seen demand like this on a global scale.” A recent report by JLL showed an average 3% vacancy rate at data centers "due to insatiable demand and despite rampant construction.”

 Another reason office towers are turning to data centers is money. Building out data centers is expensive, which means data center operators usually sign longer leases and renew them reliably. They're also willing to pay a price premium due to the high demand for space. A recent report from real estate data firm CoStar showed that One Wilshire is getting double the rent for data center space that comparable buildings are getting for offices.

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